Energy Transfer Partners, L.P. (Form: 10-Q, Received: 11/09/2016 16:26:05)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-11727

ENERGY TRANSFER PARTNERS, L.P.

(Exact name of registrant as specified in its charter)



Delaware		73-1493906
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

8111 Westchester Drive, Suite 600, Dallas, Texas 75225

(Address of principal executive offices) (zip code)

(214) 981-0700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

At November 4, 2016 , the registrant had 542,668,309 Common Units outstanding.

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FORM 10-Q

ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES

TABLE OF CONTENTS



PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

Consolidated Balance Sheets	1

Consolidated Statements of Operations	3

Consolidated Statements of Comprehensive Income	4

Consolidated Statement of Equity	5

Consolidated Statements of Cash Flows	6

Notes to Consolidated Financial Statements	7

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	51

ITEM 4. CONTROLS AND PROCEDURES	52

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	54

ITEM 1A. RISK FACTORS	54

ITEM 6. EXHIBITS	56

SIGNATURE	57

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Forward-Looking Statements

Certain matters discussed in this report, excluding historical information, as well as some statements by Energy Transfer Partners, L.P. (the “Partnership,” or “ETP”) in periodic press releases and some oral statements of the Partnership’s officials during presentations about the Partnership, include forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Statements using words such as “anticipate,” “believe,” “intend,” “project,” “plan,” “expect,” “continue,” “estimate,” “goal,” “forecast,” “may,” “will” or similar expressions help identify forward-looking statements. Although the Partnership and its general partner believe such forward-looking statements are based on reasonable assumptions and current expectations and projections about future events, no assurance can be given that such assumptions, expectations, or projections will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, the Partnership’s actual results may vary materially from those anticipated, projected or expected, forecasted, estimated or expressed in forward-looking statements since many of the factors that determine these results are subject to uncertainties and risks that are difficult to predict and beyond management’s control. For additional discussion of risks, uncertainties and assumptions, see “Part I – Item 1A. Risk Factors” in the Partnership’s Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on February 29, 2016 .

Definitions

The following is a list of certain acronyms and terms generally used in the energy industry and throughout this document:



	/d		per day

	AmeriGas		AmeriGas Partners, L.P.

	AOCI		accumulated other comprehensive income (loss)

	Bbls		barrels

	Btu		British thermal unit, an energy measurement used by gas companies to convert the volume of gas used to its heat equivalent, and thus calculate the actual energy used

	Capacity		capacity of a pipeline, processing plant or storage facility refers to the maximum capacity under normal operating conditions and, with respect to pipeline transportation capacity, is subject to multiple factors (including natural gas injections and withdrawals at various delivery points along the pipeline and the utilization of compression) which may reduce the throughput capacity from specified capacity levels

	Citrus		Citrus, LLC

	CrossCountry		CrossCountry Energy, LLC

	EPA		Environmental Protection Agency

	ETC FEP		ETC Fayetteville Express Pipeline, LLC

	ETC MEP		ETC Midcontinent Express Pipeline, L.L.C.

	ETC OLP		La Grange Acquisition, L.P., which conducts business under the assumed name of Energy Transfer Company

	ETC Tiger		ETC Tiger Pipeline, LLC

	ETE		Energy Transfer Equity, L.P., a publicly traded partnership and the owner of ETP LLC

	ET Interstate		Energy Transfer Interstate Holdings, LLC

	ET Rover		ET Rover Pipeline LLC

	ETP Credit Facility		ETP’s $3.75 billion revolving credit facility

	ETP GP		Energy Transfer Partners GP, L.P., the general partner of ETP

	ETP Holdco		ETP Holdco Corporation

	ETP LLC		Energy Transfer Partners, L.L.C., the general partner of ETP GP

	Exchange Act		Securities Exchange Act of 1934

	FEP		Fayetteville Express Pipeline LLC

	FERC		Federal Energy Regulatory Commission

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	FGT		Florida Gas Transmission Company, LLC

	GAAP		accounting principles generally accepted in the United States of America

	HPC		RIGS Haynesville Partnership Co. and its wholly-owned subsidiary, Regency Intrastate Gas LP

	IDRs		incentive distribution rights

	Lake Charles LNG		Lake Charles LNG Company, LLC (previously named Trunkline LNG Company, LLC), a subsidiary of ETE

	LIBOR		London Interbank Offered Rate

	LNG		liquefied natural gas

	Lone Star		Lone Star NGL LLC

	MEP		Midcontinent Express Pipeline LLC

	MMBtu		million British thermal units

	MTBE		methyl tertiary butyl ether

	NGL		natural gas liquid, such as propane, butane and natural gasoline

	NYMEX		New York Mercantile Exchange

	OSHA		federal Occupational Safety and Health Act

	OTC		over-the-counter

	Panhandle		Panhandle Eastern Pipe Line Company, LP and its subsidiaries

	PCBs		polychlorinated biphenyls

	PennTex		PennTex Midstream Partners, LP

	PES		Philadelphia Energy Solutions, a refining joint venture

	PHMSA		Pipeline Hazardous Materials Safety Administration

	Preferred Units		ETP Series A cumulative convertible preferred units

	Regency		Regency Energy Partners LP

	Retail Holdings		ETP Retail Holdings, LLC, a joint venture between subsidiaries of ETC OLP and Sunoco, Inc.

	Sea Robin		Sea Robin Pipeline Company, LLC, a subsidiary of Panhandle

	SEC		Securities and Exchange Commission

	Southern Union		Southern Union Company

	Sunoco Logistics		Sunoco Logistics Partners L.P.

	Sunoco LP		Sunoco LP (previously named Susser Petroleum Partners, LP)

	Transwestern		Transwestern Pipeline Company, LLC

	Trunkline		Trunkline Gas Company, LLC, a subsidiary of Panhandle

Adjusted EBITDA is a term used throughout this document, which we define as earnings before interest, taxes, depreciation, depletion, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, non-cash impairment charges, losses on extinguishments of debt and other non-operating income or expense items. Unrealized gains and losses on commodity risk management activities include unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Adjusted EBITDA reflects amounts for less than wholly-owned subsidiaries based on 100% of the subsidiaries’ results of operations and for unconsolidated affiliates based on the Partnership’s proportionate ownership.

iii

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(unaudited)



	September 30, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	377		$	527
Accounts receivable, net	2,668			2,118
Accounts receivable from related companies	144			268
Inventories	1,604			1,213
Derivative assets	30			40
Other current assets	658			532
Total current assets	5,481			4,698

Property, plant and equipment	55,948			50,869
Accumulated depreciation and depletion	(6,866		)	(5,782		)
	49,082			45,087

Advances to and investments in unconsolidated affiliates	4,648			5,003
Non-current derivative assets	11			—
Other non-current assets, net	581			536
Intangible assets, net	3,985			4,421
Goodwill	4,139			5,428
Total assets	$	67,927		$	65,173

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(unaudited)



	September 30, 2016			December 31, 2015
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	2,509		$	1,859
Accounts payable to related companies	19			25
Derivative liabilities	259			63
Accrued and other current liabilities	2,179			2,048
Current maturities of long-term debt	1,216			126
Total current liabilities	6,182			4,121

Long-term debt, less current maturities	29,182			28,553
Long-term notes payable – related companies	83			233
Non-current derivative liabilities	160			137
Deferred income taxes	4,438			4,082
Other non-current liabilities	919			968

Commitments and contingencies
Series A Preferred Units	33			33
Redeemable noncontrolling interests	15			15

Equity:
General Partner	223			306
Limited Partners:
Common Unitholders	15,665			17,043
Class H Unitholder	3,478			3,469
Class I Unitholder	2			14
Accumulated other comprehensive income (loss)	(4		)	4
Total partners’ capital	19,364			20,836
Noncontrolling interest	7,551			6,195
Total equity	26,915			27,031
Total liabilities and equity	$	67,927		$	65,173

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in millions, except per unit data)

(unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
REVENUES:
Natural gas sales	$	1,069		$	960		2,602			2,893
NGL sales	1,249			961			3,339			2,930
Crude sales	1,649			1,859			4,572			6,747
Gathering, transportation and other fees	986			1,026			2,991			2,999
Refined product sales (see Note 2)	177			1,046			656			9,136
Other (see Note 2)	401			749			1,141			3,762
Total revenues	5,531			6,601			15,301			28,467
COSTS AND EXPENSES:
Cost of products sold (see Note 2)	3,931			4,942			10,529			22,792
Operating expenses (see Note 2)	388			518			1,110			1,763
Depreciation, depletion and amortization	503			471			1,469			1,451
Selling, general and administrative (see Note 2)	71			94			226			389
Total costs and expenses	4,893			6,025			13,334			26,395
OPERATING INCOME	638			576			1,967			2,072
OTHER INCOME (EXPENSE):
Interest expense, net	(345		)	(333		)	(981		)	(979		)
Equity in earnings of unconsolidated affiliates	65			214			260			388
Impairment of investment in an unconsolidated affiliate	(308		)	—			(308		)	—
Losses on extinguishments of debt	—			(10		)	—			(43		)
Losses on interest rate derivatives	(28		)	(64		)	(179		)	(14		)
Other, net	52			32			96			56
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)	74			415			855			1,480
Income tax expense (benefit)	(64		)	22			(131		)	(20		)
NET INCOME	138			393			986			1,500
Less: Net income (loss) attributable to noncontrolling interest	64			(24		)	231			182
Less: Net loss attributable to predecessor	—			—			—			(34		)
NET INCOME ATTRIBUTABLE TO PARTNERS	74			417			755			1,352
General Partner’s interest in net income	220			277			740			779
Class H Unitholder’s interest in net income	93			66			257			184
Class I Unitholder’s interest in net income	2			15			6			80
Common Unitholders’ interest in net income (loss)	$	(241	)	$	59		$	(248	)	$	309
NET INCOME (LOSS) PER COMMON UNIT:
Basic	$	(0.49	)	$	0.11		$	(0.54	)	$	0.70
Diluted	$	(0.49	)	$	0.10		$	(0.54	)	$	0.68

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in millions)

(unaudited)



	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016			2015
Net income	$	138	$	393		986			1,500
Other comprehensive income, net of tax:
Change in value of derivative instruments accounted for as cash flow hedges	—		—			—			1
Change in value of available-for-sale securities	—		(1		)	5			(1		)
Actuarial gain (loss) relating to pension and other postretirement benefit plans	—		—			(3		)	45
Foreign currency translation adjustments	—		1			(1		)	(1		)
Change in other comprehensive income from unconsolidated affiliates	2		—			(9		)	(2		)
	2		—			(8		)	42
Comprehensive income	140		393			978			1,542
Less: Comprehensive income (loss) attributable to noncontrolling interest	64		(24		)	231			182
Less: Comprehensive loss attributable to predecessor	—		—			—			(34		)
Comprehensive income attributable to partners	$	76	$	417		$	747		$	1,394

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016

(Dollars in millions)

(unaudited)



				Limited Partners
	General Partner			Common Units			Class H Units			Class I Units			Accumulated Other Comprehensive Income			Noncontrolling Interest			Total
Balance, December 31, 2015	$	306		$	17,043		$	3,469		$	14		$	4		$	6,195		$	27,031
Distributions to partners	(823		)	(1,580		)	(248		)	(18		)	—			—			(2,669		)
Distributions to noncontrolling interest	—			—			—			—			—			(334		)	(334		)
Units issued for cash	—			794			—			—			—			—			794
Subsidiary units issued	—			34			—			—			—			1,271			1,305
Capital contributions from noncontrolling interest	—			—			—			—			—			187			187
Sunoco, Inc. retail business to Sunoco LP transaction	—			(405		)	—			—			—			—			(405		)
Other comprehensive income, net of tax	—			—			—			—			(8		)	—			(8		)
Other, net	—			27			—			—			—			1			28
Net income (loss)	740			(248		)	257			6			—			231			986
Balance, September 30, 2016	$	223		$	15,665		$	3,478		$	2		$	(4	)	$	7,551		$	26,915

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(unaudited)



	Nine Months Ended September 30,
	2016			2015
OPERATING ACTIVITIES
Net income	$	986		$	1,500
Reconciliation of net income to net cash provided by operating activities:
Depreciation, depletion and amortization	1,469			1,451
Deferred income taxes	(154		)	22
Amortization included in interest expense	(16		)	(30		)
Inventory valuation adjustments	(143		)	(16		)
Unit-based compensation expense	60			59
Losses on extinguishments of debt	—			43
Impairment of investment in an unconsolidated affiliate	308			—
Distributions on unvested awards	(19		)	(12		)
Equity in earnings of unconsolidated affiliates	(260		)	(388		)
Distributions from unconsolidated affiliates	292			263
Other non-cash	(230		)	23
Net change in operating assets and liabilities, net of effects of acquisition	172			(922		)
Net cash provided by operating activities	2,465			1,993
INVESTING ACTIVITIES
Proceeds from the Sunoco, Inc. retail business to Sunoco LP transaction	2,200			—
Proceeds from Bakken Pipeline Transaction	—			980
Cash proceeds from the Susser Exchange Transaction	—			967
Proceeds from sale of noncontrolling interest	—			64
Cash paid for acquisition of a noncontrolling interest	—			(129		)
Cash transferred to ETE in connection with the Sunoco LP Exchange	—			(114		)
Cash paid for all other acquisitions	(159		)	(475		)
Capital expenditures, excluding allowance for equity funds used during construction	(5,787		)	(6,531		)
Contributions in aid of construction costs	44			27
Contributions to unconsolidated affiliates	(47		)	(75		)
Distributions from unconsolidated affiliates in excess of cumulative earnings	112			119
Proceeds from the sale of assets	6			20
Change in restricted cash	(8		)	10
Other	(1		)	(14		)
Net cash used in investing activities	(3,640		)	(5,151		)
FINANCING ACTIVITIES
Proceeds from borrowings	13,073			14,808
Repayments of long-term debt	(11,308		)	(11,620		)
Cash received from affiliate notes	1,606			—
Cash paid on affiliate notes	(1,607		)	—
Units issued for cash	794			1,030
Subsidiary units issued for cash	1,305			1,274
Predecessor units issued for cash	—			34
Capital contributions from noncontrolling interest	187			583
Distributions to partners	(2,669		)	(2,253		)
Predecessor distributions to partners	—			(202		)
Distributions to noncontrolling interest	(334		)	(247		)
Debt issuance costs	(22		)	(54		)
Net cash provided by financing activities	1,025			3,353
Increase in cash and cash equivalents	(150		)	195
Cash and cash equivalents, beginning of period	527			663
Cash and cash equivalents, end of period	$	377		$	858

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar and unit amounts, except per unit data, are in millions)

(unaudited)


1.	ORGANIZATION AND BASIS OF PRESENTATION

Organization

Energy Transfer Partners, L.P., a publicly traded Delaware master limited partnership, and its subsidiaries (collectively, the “Partnership,” “we,” “us,” “our” or “ETP”) are managed by our general partner, ETP GP, which is in turn managed by its general partner, ETP LLC. ETE, a publicly traded master limited partnership, owns ETP LLC. The consolidated financial statements of the Partnership presented herein include our operating subsidiaries described below.

Our activities are primarily conducted through our operating subsidiaries (collectively, the “Operating Companies”) as follows:

•

ETC OLP, a Texas limited partnership primarily engaged in midstream and intrastate transportation and storage natural gas operations. ETC OLP owns and operates, through its wholly and majority-owned subsidiaries, natural gas gathering systems, intrastate natural gas pipeline systems and gas processing plants and is engaged in the business of purchasing, gathering, transporting, processing, and marketing natural gas and NGLs in the states of Texas, Louisiana, New Mexico and West Virginia.


•	ET Interstate, a Delaware limited liability company with revenues consisting primarily of fees earned from natural gas transportation services and operational gas sales. ET Interstate is the parent company of:


•	Transwestern, a Delaware limited liability company engaged in interstate transportation of natural gas. Transwestern’s revenues consist primarily of fees earned from natural gas transportation services and operational gas sales.


•	ETC FEP, a Delaware limited liability company that directly owns a 50% interest in FEP, which owns 100% of the Fayetteville Express interstate natural gas pipeline.


•	ETC Tiger, a Delaware limited liability company engaged in interstate transportation of natural gas.


•	CrossCountry, a Delaware limited liability company that indirectly owns a 50% interest in Citrus, which owns 100% of the FGT interstate natural gas pipeline.


•	ETC MEP, a Delaware limited liability company that directly owns a 50% interest in MEP.


•	ETC Compression, LLC, a Delaware limited liability company engaged in natural gas compression services and related equipment sales.

•

ETP Holdco, a Delaware limited liability company that indirectly owns Panhandle and Sunoco, Inc. Panhandle owns and operates assets in the regulated and unregulated natural gas industry and is primarily engaged in the transportation and storage of natural gas in the United States. Sunoco, Inc. owned and operated retail marketing assets, which were contributed to Sunoco LP in March 2016, as discussed in Note 2. Subsequent to this transaction, Sunoco Inc.’s assets primarily consist of its ownership in Retail Holdings, which owns noncontrolling interests in Sunoco LP and PES.


•	Sunoco Logistics, a publicly traded Delaware limited partnership that owns and operates a logistics business, consisting of a geographically diverse portfolio of complementary pipeline, terminalling, and acquisition and marketing assets which are used to facilitate the purchase and sale of crude oil, NGLs and refined products.

•

Effective July 1, 2015, ETE acquired 100% of the membership interests of Sunoco GP LLC, the general partner of Sunoco LP, and all of the IDRs of Sunoco LP from ETP, and in exchange, ETE transferred to ETP 21 million ETP common units. These operations were reported within the retail marketing segment. In connection with this transaction, the Partnership deconsolidated Sunoco LP, and its remaining investment in Sunoco LP is accounted for under the equity method. Additionally, in March 2016 and as discussed in Note 2 , ETP contributed to Sunoco LP its remaining 68.42% interest in Sunoco, LLC and 100% interest in the legacy Sunoco, Inc. retail business effective January 1, 2016.

Our financial statements reflect the following reportable business segments:

• intrastate transportation and storage;

• interstate transportation and storage;

• midstream;

• liquids transportation and services;

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• investment in Sunoco Logistics;

• retail marketing; and

• all other.

Basis of Presentation

The unaudited financial information included in this Form 10-Q has been prepared on the same basis as the audited consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2015 . In the opinion of the Partnership’s management, such financial information reflects all adjustments necessary for a fair presentation of the financial position and the results of operations for such interim periods in accordance with GAAP. All intercompany items and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the SEC.

Certain prior period amounts have been reclassified to conform to the current year presentation. These reclassifications had no impact on net income or total equity.

Merger with Regency. On April 30, 2015, a wholly-owned subsidiary of the Partnership merged with Regency, with Regency surviving as a wholly-owned subsidiary of the Partnership (the “Regency Merger”). The Regency Merger was a combination of entities under common control; therefore, Regency’s assets and liabilities were not adjusted. The Partnership’s consolidated financial statements have been retrospectively adjusted to reflect consolidation of Regency for all prior periods subsequent to May 26, 2010 (the date ETE acquired Regency’s general partner).

Use of Estimates

The unaudited consolidated financial statements have been prepared in conformity with GAAP, which includes the use of estimates and assumptions made by management that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities that exist at the date of the consolidated financial statements. Although these estimates are based on management’s available knowledge of current and expected future events, actual results could be different from those estimates.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which clarifies the principles for recognizing revenue based on the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB deferred the effective date of ASU 2014-09, which is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within those annual periods. ASU 2014-09 can be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption. The Partnership is currently evaluating the impact, if any, that adopting this new accounting standard will have on our revenue recognition policies.

In February 2015, the FASB issued Accounting Standards Update No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”), which changed the requirements for consolidations analysis. Under ASU 2015-02, reporting entities are required to evaluate whether they should consolidate certain legal entities. The Partnership adopted this standard on January 1, 2016, and the adoption did not impact the Partnership’s financial position or results of operations.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 , Leases (Topic 842 ) (“ASU 2016-02”), which establishes the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Partnership is currently evaluating the impact, if any, that adopting this new standard will have on the consolidated financial statements and related disclosures.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Stock Compensation (Topic 718) (“ASU 2016-09”). The objective of the update is to reduce complexity in accounting standards. The areas for simplification in this update involve several aspects of the accounting for employee share-based payment transactions, including the income tax

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consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The Partnership is currently evaluating the impact that it will have on the consolidated financial statements and related disclosures.


2.	ACQUISITIONS AND CONTRIBUTION TRANSACTIONS

Sunoco Retail to Sunoco LP

In March 2016, ETP contributed to Sunoco LP its remaining 68.42% interest in Sunoco, LLC and 100% interest in the legacy Sunoco, Inc. retail business for $2.23 billion . Sunoco LP paid $2.20 billion in cash, including a working capital adjustment, and issued 5.7 million Sunoco LP common units to Retail Holdings, a wholly-owned subsidiary of the Partnership. The transaction was effective January 1, 2016. In connection with this transaction, the Partnership deconsolidated the legacy Sunoco, Inc. retail business, including goodwill of $1.29 billion and intangible assets of $294 million . The results of Sunoco, LLC and the legacy Sunoco, Inc. retail business’ operations have not been presented as discontinued operations and Sunoco, Inc.’s retail business assets and liabilities have not been presented as held for sale in the Partnership’s consolidated financial statements.

Following is a summary of amounts reflected for the prior periods in ETP’s consolidated statements of operations related to Sunoco, LLC and the legacy Sunoco, Inc. retail business, which operations are no longer consolidated for the current periods in 2016:



	Three Months Ended September 30, 2015		Nine Months Ended September 30, 2015
Revenues	$	1,363	$	11,705
Cost of products sold	1,149		10,519
Operating expenses	149		701
Selling, general and administrative expenses	8		101

PennTex Acquisition

On November 1, 2016, ETP acquired certain interests in PennTex from various parties for total consideration of approximately $640 million in ETP units and cash. Through this transaction, ETP acquired a controlling financial interest in PennTex, whose assets complement ETP’s existing midstream footprint in the region. The assets and liabilities assumed in this transaction will be recorded at fair value as of the acquisition date, and the initial measurement of fair value is not yet complete.

Sunoco Logistics’ Vitol Acquisition

In November 2016 , Sunoco Logistics completed an acquisition from Vitol, Inc. (“Vitol”) of an integrated crude oil business in West Texas for $760 million plus working capital. The acquisition provides Sunoco Logistics with an approximately 2 million barrel crude oil terminal in Midland, Texas, a crude oil gathering and mainline pipeline system in the Midland Basin, including a significant acreage dedication from an investment-grade Permian producer, and crude oil inventories related to Vitol's crude oil purchasing and marketing business in West Texas. The acquisition also included the purchase of a 50% interest in SunVit Pipeline LLC ("SunVit"), which increased Sunoco Logistics' overall ownership of SunVit to 100% . The assets and liabilities acquired will be recorded at fair value as of the acquisition date, and the initial fair value measurements are not yet complete.

Sunoco Logistics’ Permian Express Partners

In November 2016, Sunoco Logistics announced its intent to form Permian Express Partners LLC ("PEP"), a strategic joint venture, with ExxonMobil Corp. Sunoco Logistics will contribute its Permian Express 1, Permian Express 2 and Permian Longview and Louisiana Access pipelines. ExxonMobil Corp will contribute its Longview to Louisiana and Pegasus pipelines; Hawkins gathering system; an idle pipeline in southern Oklahoma; and its Patoka, Illinois terminal. The closing of PEP will be subject to certain closing conditions, including regulatory approval, and is expected to be completed in the first quarter 2017. Upon closing, Sunoco Logistics' ownership percentage is expected to be approximately 85% . Sunoco Logistics will maintain a controlling financial and voting interest in PEP and will operate all of the assets contributed to the joint venture. As such, PEP will be reflected as a consolidated subsidiary of Sunoco Logistics.

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3.	CASH AND CASH EQUIVALENTS

Cash and cash equivalents include all cash on hand, demand deposits, and investments with original maturities of three months or less. We consider cash equivalents to include short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.

We place our cash deposits and temporary cash investments with high credit quality financial institutions. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limit.

The net change in operating assets and liabilities, net of effects of acquisition, included in cash flows from operating activities is comprised as follows:



	Nine Months Ended September 30,
	2016			2015
Accounts receivable	$	(595	)	$	523
Accounts receivable from related companies	80			(467		)
Inventories	(299		)	(239		)
Other current assets	(135		)	(96		)
Other non-current assets, net	(1		)	116
Accounts payable	635			(988		)
Accounts payable to related companies	24			75
Accrued and other current liabilities	213			25
Other non-current liabilities	31			47
Derivative assets and liabilities, net	219			82
Net change in operating assets and liabilities, net of effects of acquisition	$	172		$	(922	)

Non-cash investing and financing activities are as follows:



	Nine Months Ended September 30,
	2016		2015
NON-CASH INVESTING ACTIVITIES:
Accrued capital expenditures	$	991	$	963
Sunoco LP limited partner interest received in exchange for contribution of the Sunoco, Inc. retail business to Sunoco LP	194		—
Net gains from subsidiary common unit issuances	34		118
NON-CASH FINANCING ACTIVITIES:
Contribution of property, plant and equipment from noncontrolling interest	$	—	$	34
Issuance of common units in connection with the Regency Merger	—		9,250
Issuance of Class H Units in connection with the Bakken Pipeline Transaction	—		1,946
Redemption of common units in connection with the Bakken Pipeline Transaction	—		999
Redemption of common units in connection with the Sunoco LP Exchange	—		52


4.	ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES

MEP

The Partnership evaluated its investment in MEP for impairment as of September 30, 2016 , based on FASB Accounting Standards Codification 323, Investments - Equity Method and Joint Ventures. Based on commercial discussions with current and potential shippers on MEP regarding the outlook for long-term transportation contract rates, the Partnership concluded that the fair value of its investment was other than temporarily impaired, resulting in a non-cash impairment of $308 million ,

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which was recorded in the three months ended September 30, 2016. The carrying value of the Partnership’s investment in MEP as of September 30, 2016 and December 31, 2015 was $327 million and $660 million , respectively.


5.	INVENTORIES

Inventories consisted of the following:



	September 30, 2016		December 31, 2015
Natural gas and NGLs	$	684	$	415
Crude oil	590		424
Refined products	114		104
Other	216		270
Total inventories	$	1,604	$	1,213

We utilize commodity derivatives to manage price volatility associated with our natural gas inventories stored in our Bammel storage facility. Changes in fair value of designated hedged inventory are recorded in inventory on our consolidated balance sheets and cost of products sold in our consolidated statements of operations.


6.	FAIR VALUE MEASURES

Based on the estimated borrowing rates currently available to us and our subsidiaries for loans with similar terms and average maturities, the aggregate fair value and carrying amount of our consolidated debt obligations as of September 30, 2016 was $31.38 billion and $30.40 billion , respectively. As of December 31, 2015 , the aggregate fair value and carrying amount of our consolidated debt obligations was $25.71 billion and $28.68 billion , respectively. The fair value of our consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities.

We have commodity derivatives, interest rate derivatives and embedded derivatives in the Preferred Units that are accounted for as assets and liabilities at fair value in our consolidated balance sheets. We determine the fair value of our assets and liabilities subject to fair value measurement by using the highest possible “level” of inputs. Level 1 inputs are observable quotes in an active market for identical assets and liabilities. We consider the valuation of marketable securities and commodity derivatives transacted through a clearing broker with a published price from the appropriate exchange as a Level 1 valuation. Level 2 inputs are inputs observable for similar assets and liabilities. We consider OTC commodity derivatives entered into directly with third parties as a Level 2 valuation since the values of these derivatives are quoted on an exchange for similar transactions. Additionally, we consider our options transacted through our clearing broker as having Level 2 inputs due to the level of activity of these contracts on the exchange in which they trade. We consider the valuation of our interest rate derivatives as Level 2 as the primary input, the LIBOR curve, is based on quotes from an active exchange of Eurodollar futures for the same period as the future interest swap settlements. Level 3 inputs are unobservable. Derivatives related to the embedded derivatives in our preferred units are valued using a binomial lattice model. The market inputs utilized in the model include credit spread, probabilities of the occurrence of certain events, common unit price, dividend yield, and expected value, and are considered Level 3. During the nine months ended September 30, 2016 , no transfers were made between any levels within the fair value hierarchy.

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The following tables summarize the gross fair value of our financial assets and liabilities measured and recorded at fair value on a recurring basis as of September 30, 2016 and December 31, 2015 based on inputs used to derive their fair values:



				Fair Value Measurements at September 30, 2016
	Fair Value Total			Level 1			Level 2			Level 3
Assets:
Interest rate derivatives	$	18		$	—		$	18		$	—
Commodity derivatives:
Natural Gas:
Basis Swaps IFERC/NYMEX	5			5			—			—
Swing Swaps IFERC	3			—			3			—
Fixed Swaps/Futures	24			24			—			—
Forward Physical Swaps	2			—			2			—
Power:
Forwards	6			—			6			—
Options – Puts	1			1			—			—
Natural Gas Liquids – Forwards/Swaps	85			85			—			—
Refined Products – Futures	7			7			—			—
Crude – Futures	8			8			—			—
Total commodity derivatives	141			130			11			—
Total assets	$	159		$	130		$	29		$	—
Liabilities:
Interest rate derivatives	$	(375	)	$	—		$	(375	)	$	—
Embedded derivatives in the Preferred Units	(1		)	—			—			(1		)
Commodity derivatives:
Natural Gas:
Basis Swaps IFERC/NYMEX	(5		)	(5		)	—			—
Swing Swaps IFERC	(3		)	—			(3		)	—
Fixed Swaps/Futures	(36		)	(36		)	—			—
Forward Physical Swaps	(1		)	—			(1		)	—
Power:
Forwards	(4		)	—			(4		)	—
Options – Calls	(2		)	(2		)	—			—
Natural Gas Liquids – Forwards/Swaps	(114		)	(114		)	—			—
Refined Products – Futures	(16		)	(16		)	—			—
Crude – Futures	(8		)	(8		)	—			—
Total commodity derivatives	(189		)	(181		)	(8		)	—
Total liabilities	$	(565	)	$	(181	)	$	(383	)	$	(1	)

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				Fair Value Measurements at December 31, 2015
	Fair Value Total			Level 1			Level 2			Level 3
Assets:
Commodity derivatives:
Natural Gas:
Basis Swaps IFERC/NYMEX	$	16		$	16		$	—		$	—
Swing Swaps IFERC	10			2			8			—
Fixed Swaps/Futures	274			274			—			—
Forward Physical Swaps	4			—			4			—
Power:
Forwards	22			—			22			—
Futures	3			3			—			—
Options – Puts	1			1			—			—
Options – Calls	1			1			—			—
Natural Gas Liquids – Forwards/Swaps	99			99			—			—
Refined Products – Futures	9			9			—			—
Crude – Futures	9			9			—			—
Total commodity derivatives	448			414			34			—
Total assets	$	448		$	414		$	34		$	—
Liabilities:
Interest rate derivatives	$	(171	)	$	—		$	(171	)	$	—
Embedded derivatives in the Preferred Units	(5		)	—			—			(5		)
Commodity derivatives:
Natural Gas:
Basis Swaps IFERC/NYMEX	(16		)	(16		)	—			—
Swing Swaps IFERC	(12		)	(2		)	(10		)	—
Fixed Swaps/Futures	(203		)	(203		)	—			—
Power:
Forwards	(22		)	—			(22		)	—
Futures	(2		)	(2		)	—			—
Options – Puts	(1		)	(1		)	—			—
Natural Gas Liquids – Forwards/Swaps	(89		)	(89		)	—			—
Crude – Futures	(5		)	(5		)	—			—
Total commodity derivatives	(350		)	(318		)	(32		)	—
Total liabilities	$	(526	)	$	(318	)	$	(203	)	$	(5	)

The following table presents a reconciliation of the beginning and ending balances for our Level 3 financial instruments measured at fair value on a recurring basis using significant unobservable inputs for the nine months ended September 30, 2016 .



Balance, December 31, 2015	$	(5	)
Net unrealized gains included in other income (expense)	4
Balance, September 30, 2016	$	(1	)


7.	NET INCOME (LOSS) PER LIMITED PARTNER UNIT

Net income for partners’ capital and statement of operations presentation purposes is allocated to the General Partner and Limited Partners in accordance with their respective partnership percentages, after giving effect to priority income allocations

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for incentive distributions, if any, to the General Partner, the holder of the IDRs pursuant to the Partnership Agreement, which are declared and paid following the close of each quarter. Earnings in excess of distributions are allocated to the General Partner and Limited Partners based on their respective ownership interests. Loss attributable to predecessor represents amounts allocated to the former Regency partners and have no impact on net income (loss) per unit for the periods prior to the Regency Merger.

A reconciliation of net income (loss) and weighted average units used in computing basic and diluted net income (loss) per unit is as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net income	138			393			986			1,500
Less: Income (loss) attributable to noncontrolling interest	64			(24		)	231			182
Less: Loss attributable to predecessor	—			—			—			(34		)
Net income, net of noncontrolling interest and predecessor income	74			417			755			1,352
General Partner’s interest in net income	220			277			740			779
Class H Unitholder’s interest in net income	93			66			257			184
Class I Unitholder’s interest in net income	2			15			6			80
Common Unitholders’ interest in net income (loss)	(241		)	59			(248		)	309
Additional earnings allocated to General Partner	(3		)	(3		)	(9		)	(7		)
Distributions on employee unit awards, net of allocation to General Partner	(5		)	(4		)	(15		)	(11		)
Net income (loss) available to Common Unitholders	$	(249	)	$	52		$	(272	)	$	291
Weighted average Common Units – basic ⁽¹⁾	507.4			485.0			499.8			415.1
Basic net income (loss) per Common Unit	$	(0.49	)	$	0.11		$	(0.54	)	$	0.70

Net income (loss) available to Common Unitholders	$	(249	)	$	52		$	(272	)	$	291
Income attributable to Preferred Units	—			(4		)	—			(5		)
Diluted net income (loss) available to Common Unitholders	$	(249	)	$	48		$	(272	)	$	286
Weighted average Common Units – basic ⁽¹⁾	507.4			485.0			499.8			415.1
Dilutive effect of unvested employee unit awards	—			1.4			—			1.7
Dilutive effect of Preferred Units	—			0.9			—			0.9
Weighted average Common Units – diluted ⁽¹⁾	507.4			487.3			499.8			417.7
Diluted net income (loss) per Common Unit	$	(0.49	)	$	0.10		$	(0.54	)	$	0.68

⁽¹⁾ Excludes Common Units owned by the Partnership’s consolidated subsidiaries.

Based on the declared distribution rate of $1.055 per common unit, distributions to be paid for the three months ended September 30, 2016 are expected to be $876 million in total, which exceeds net income attributable to partners for the period by $802 million . The allocation of the distributions in excess of the net income is based on the proportionate ownership interests of the Limited Partners and General Partner. Based on this allocation approach, the distributions paid to the General Partner, including incentive distributions, further exceeded the net income for the three months ended September 30, 2016, and as a result, net losses were allocated to the Limited Partners for the period.

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8.	DEBT OBLIGATIONS

Credit Facilities and Commercial Paper

ETP Credit Facility

The ETP Credit Facility allows for borrowings of up to $3.75 billion and expires in November 2019. The indebtedness under the ETP Credit Facility is unsecured, is not guaranteed by any of the Partnership’s subsidiaries and has equal rights to holders of our current and future unsecured debt. In September 2016, the Partnership initiated a commercial paper program under the borrowing limits established by the $3.75 billion ETP Credit Facility. As of September 30, 2016 , the ETP Credit Facility had $1.58 billion of outstanding borrowings, which included $208 million of commercial paper.

Sunoco Logistics Credit Facilities

Sunoco Logistics maintains a $2.50 billion unsecured revolving credit agreement (the “Sunoco Logistics Credit Facility”), which matures in March 2020. The Sunoco Logistics Credit Facility contains an accordion feature, under which the total aggregate commitment may be increased to $3.25 billion under certain conditions. As of September 30, 2016 , the Sunoco Logistics Credit Facility had $622 million of outstanding borrowings, which included $140 million of commercial paper.

ETP Senior Notes

Subsequent to the Regency Merger in 2015, ETP assumed $3.80 billion total aggregate principal amount of Regency’s senior notes, which remained outstanding as of September 30, 2016 . These notes were previously guaranteed by certain consolidated subsidiaries that had previously been consolidated by Regency. The subsidiary guarantees on all of these outstanding notes have been released.

Sunoco Logistics Senior Notes

Sunoco Logistics had $175 million of 6.125% senior notes which matured and were repaid in May 2016, using borrowings under the $2.50 billion Sunoco Logistics Credit Facility.

In July 2016, Sunoco Logistics issued $550 million aggregate principal amount of 3.90% senior notes due in July 2026. The net proceeds from this offering were used to repay outstanding credit facility borrowings and for general partnership purposes.

Bakken Financing

In August 2016, ETP, Sunoco Logistics and Phillips 66 announced the completion of the project-level financing of the Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline projects (collectively, the “Bakken Pipeline”). The $2.50 billion credit facility is anticipated to provide substantially all of the remaining capital necessary to complete the projects. As of September 30, 2016 , $1.10 billion was outstanding under this credit facility.

Compliance with Our Covenants

We were in compliance with all requirements, tests, limitations, and covenants related to our credit agreements as of September 30, 2016 .


9.	EQUITY

ETP

The changes in outstanding common units during the nine months ended September 30, 2016 were as follows:



		Number of Units
Number of common units at December 31, 2015		505.6
Common units issued in connection with equity distribution agreements		19.5
Common units issued in connection with the distribution reinvestment plan		4.7
Number of common units at September 30, 2016		529.8

In July 2016, the Partnership entered into an equity distribution agreement with an aggregate offering price up to $1.50 billion . During the nine months ended September 30, 2016 , the Partnership received proceeds of $646 million , net of $6 million

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commissions, from the issuance of common units pursuant to equity distribution agreements, which were used for general partnership purposes. As of September 30, 2016 , $1.18 billion of the Partnership’s common units remained available to be issued under an equity distribution agreement.

During the nine months ended September 30, 2016 , distributions of $148 million were reinvested under the distribution reinvestment plan. As of September 30, 2016 , a total of 6.8 million common units remain available to be issued under the existing registration statement in connection with the distribution reinvestment plan.

Sunoco Logistics

During the nine months ended September 30, 2016 , Sunoco Logistics received proceeds of $744 million , net of $8 million commissions and fees, from the issuance of Sunoco Logistics common units pursuant to equity distribution agreements, which were used for general partnership purposes.

In September 2016, Sunoco Logistics completed a public offering of 21 million common units for proceeds of $560 million , net of $7 million in fees and commissions to managers. The net proceeds from this offering were used to partially fund the acquisition from Vitol, which closed in November 2016. In October 2016, an additional 3.2 million common units were issued for proceeds of $84 million , net of fees and commissions to managers of $1 million , related to the exercise of an option in connection with the September 2016 offering.

As a result of Sunoco Logistics’ issuances of common units during the nine months ended September 30, 2016 , the Partnership recognized increases in partners’ capital of $34 million .

Bakken Equity Sale

On August 2, 2016, Bakken Holdings Company LLC, an entity in which ETP indirectly owns a 60% membership interest and Sunoco Logistics indirectly owns a 40% membership interest, agreed to sell a 49% interest in its wholly-owned subsidiary, Bakken Pipeline Investments LLC, to MarEn Bakken Company LLC, an entity jointly owned by Marathon Petroleum Corporation and Enbridge Energy Partners, L.P. for $2.00 billion in cash. This transaction is expected to close in the fourth quarter of 2016. Bakken Pipeline Investments LLC indirectly owns a 75% interest in each of Dakota Access, LLC (“Dakota Access”) and Energy Transfer Crude Oil Company, LLC (“ETCO”). The remaining 25% of each of Dakota Access and ETCO is owned by wholly-owned subsidiaries of Phillips 66. ETP will continue to consolidate Dakota Access and ETCO subsequent to this transaction.

Quarterly Distributions of Available Cash

Following are distributions declared and/or paid by the Partnership subsequent to December 31, 2015 :



Quarter Ended	Record Date	Payment Date	Rate
December 31, 2015	February 8, 2016	February 16, 2016	$	1.0550
March 31, 2016	May 6, 2016	May 16, 2016	1.0550
June 30, 2016	August 8, 2016	August 15, 2016	1.0550
September 30, 2016	November 7, 2016	November 14, 2016	1.0550

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In July 2016, ETE agreed to relinquish an aggregate amount of $720 million in incentive distributions commencing with the quarter ended June 30, 2016 and ending with the quarter ending December 31, 2017, including a relinquishment of $85 million for the quarter ended September 30, 2016. In connection with the PennTex acquisition in November 2016, discussed in Note 2, ETE has agreed to a perpetual waiver of incentive distributions in the amount of $33 million annually.

ETE has also previously agreed to relinquish additional incentive distributions. In the aggregate, including relinquishment agreed to in July and November 2016, ETE has agreed to relinquish its right to the following amounts of incentive distributions in future periods, including distributions on Class I Units.



	Total Year
2016 (remainder)	$	138
2017	626
2018	138
2019	128
Each year beyond 2019	33

Sunoco Logistics Quarterly Distributions of Available Cash

Following are distributions declared and/or paid by Sunoco Logistics subsequent to December 31, 2015 :



Quarter Ended	Record Date	Payment Date	Rate
December 31, 2015	February 8, 2016	February 12, 2016	$	0.4790
March 31, 2016	May 9, 2016	May 13, 2016	0.4890
June 30, 2016	August 8, 2016	August 12, 2016	0.5000
September 30, 2016	November 9, 2016	November 14, 2016	0.5100

In connection with the acquisition from Vitol, Sunoco Logistics’ general partner executed an amendment to its partnership agreement in September 2016 which provides for a reduction to the incentive distributions paid by Sunoco Logistics. The reductions will total $60 million over a two-year period, recognized ratably over eight quarters, beginning with the third quarter 2016 cash distribution. The incentive distribution reduction will reduce the incentive distributions that ETP receives from Sunoco Logistics, as well as the amount of distributions that ETP pays on its Class H units.

Accumulated Other Comprehensive Income (Loss)

The following table presents the components of AOCI, net of tax:



	September 30, 2016			December 31, 2015
Available-for-sale securities	$	5		$	—
Foreign currency translation adjustment	(5		)	(4		)
Actuarial gain related to pensions and other postretirement benefits	5			8
Investments in unconsolidated affiliates, net	(9		)	—
Total AOCI, net of tax	$	(4	)	$	4


10.	REGULATORY MATTERS, COMMITMENTS, CONTINGENCIES AND ENVIRONMENTAL LIABILITIES

Contingent Residual Support Agreement – AmeriGas

In connection with the closing of the contribution of its propane operations in January 2012, ETP agreed to provide contingent, residual support of $1.55 billion of intercompany borrowings made by AmeriGas and certain of its affiliates with maturities through 2022 from a finance subsidiary of AmeriGas that have maturity dates and repayment terms that mirror those of an equal principal amount of senior notes issued by this finance company subsidiary to third party purchasers. In June 2016, AmeriGas repurchased certain of its senior notes, which caused a reduction in the amount supported by ETP under the contingent residual support agreement. As of September 30, 2016 , ETP continued to provide contingent, residual support of approximately $1 billion of borrowings.

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ETP Retail Holdings Guarantee of Sunoco LP Notes

Retail Holdings has provided a limited contingent guarantee of collection, but not of payment, to Sunoco LP with respect to (i) $800 million principal amount of 6.375% senior notes due 2023 issued by Sunoco LP, (ii) $800 million principal amount of 6.25% senior notes due 2021 issued by Sunoco LP and (iii) $2.035 billion aggregate principal for Sunoco LP’s term loan due 2019.

NGL Pipeline Regulation

We have interests in NGL pipelines located in Texas and New Mexico. We commenced the interstate transportation of NGLs in 2013, which is subject to the jurisdiction of the FERC under the Interstate Commerce Act (“ICA”) and the Energy Policy Act of 1992. Under the ICA, tariff rates must be just and reasonable and not unduly discriminatory and pipelines may not confer any undue preference. The tariff rates established for interstate services were based on a negotiated agreement; however, the FERC’s rate-making methodologies may limit our ability to set rates based on our actual costs, may delay or limit the use of rates that reflect increased costs and may subject us to potentially burdensome and expensive operational, reporting and other requirements. Any of the foregoing could adversely affect our business, revenues and cash flow.

FERC Audit

In March 2016, the FERC commenced an audit of Trunkline for the period from January 1, 2013 to present to evaluate Trunkline’s compliance with the requirements of its FERC gas tariff, the accounting regulations of the Uniform System of Accounts as prescribed by the FERC, and the FERC’s annual reporting requirements. The audit is ongoing.

Commitments

In the normal course of our business, we purchase, process and sell natural gas pursuant to long-term contracts and we enter into long-term transportation and storage agreements. Such contracts contain terms that are customary in the industry. We believe that the terms of these agreements are commercially reasonable and will not have a material adverse effect on our financial position or results of operations.

We have certain non-cancelable leases for property and equipment, which require fixed monthly rental payments and expire at various dates through 2058 . The table below reflects rental expense under these operating leases included in operating expenses in the accompanying statements of operations, which include contingent rentals, and rental expense recovered through related sublease rental income:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016		2015
Rental expense ⁽¹⁾	$	19	$	35		$	58	$	141
Less: Sublease rental income	—		(3		)	—		(15		)
Rental expense, net	$	19	$	32		$	58	$	126


⁽¹⁾	Includes contingent rentals totaling $9 million and $19 million for the three and nine months ended September 30, 2015 , respectively.

Our joint venture agreements require that we fund our proportionate share of capital contributions to our unconsolidated affiliates. Such contributions will depend upon our unconsolidated affiliates’ capital requirements, such as for funding capital projects or repayment of long-term obligations.

Litigation and Contingencies

We may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business. Natural gas and crude oil are flammable and combustible. Serious personal injury and significant property damage can arise in connection with their transportation, storage or use. In the ordinary course of business, we are sometimes threatened with or named as a defendant in various lawsuits seeking actual and punitive damages for product liability, personal injury and property damage. We maintain liability insurance with insurers in amounts and with coverage and deductibles management believes are reasonable and prudent, and which are generally accepted in the industry. However, there can be no assurance that the levels of insurance protection currently in effect will continue to be available at reasonable prices or that such levels will remain adequate to protect us from material expenses related to product liability, personal injury or property damage in the future.

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Mont Belvieu Incident

On June 26, 2016, a subsurface release of hydrocarbons and water, and a subsequent fire, occurred at Lone Star’s South Terminal. All employees and contractors were accounted for, and there were no injuries. The cause of the fire and evaluation of possible damages is currently under investigation.

MTBE Litigation

Sunoco, Inc. and/or Sunoco, Inc. (R&M), along with other refiners, manufacturers and sellers of gasoline, are defendants in lawsuits alleging MTBE contamination of groundwater. The plaintiffs typically include water purveyors and municipalities responsible for supplying drinking water and governmental authorities. The plaintiffs primarily assert product liability claims and additional claims including nuisance, trespass, negligence, violation of environmental laws and deceptive business practices. The plaintiffs in all of the cases seek to recover compensatory damages, and in some cases also seek natural resource damages, injunctive relief, punitive damages and attorneys’ fees.

As of September 30, 2016 , Sunoco, Inc. is a defendant in six cases, including cases initiated by the States of New Jersey, Vermont, Pennsylvania, Rhode Island, and two others by the Commonwealth of Puerto Rico with the more recent Puerto Rico action being a companion case alleging damages for additional sites beyond those at issue in the initial Puerto Rico action. Four of these cases are venued in a multidistrict litigation proceeding in a New York federal court. The New Jersey, Puerto Rico, Vermont, and Pennsylvania cases assert natural resource damage claims.

Fact discovery has concluded with respect to an initial set of 19 sites each that will be the subject of the first trial phase in the New Jersey case and the initial Puerto Rico case. The initial set of 19 New Jersey trial sites are now pending before the United States District Judge for the District of New Jersey, the Hon. Freda L. Wolfson for the pre-trial and trial phases. Judge Wolfson then referred the case to United States Magistrate Judge for the District of New Jersey, the Hon. Lois H. Goodman. Judge Goodman conducted a status conference with all of the parties and inquired whether the parties will engage in a global mediation and instructed the parties to exchange possible mediator names. All parties agreed to participate in global settlement discussions in a global mediation forum before Hon. Garrett Brown (Ret.), a Judicial Arbitration Mediation Service mediator. The remaining portion of the New Jersey case remains in the multidistrict litigation. The first mediation session with Judge Brown is scheduled for November 2 through November 3, 2016. It is reasonably possible that a loss may be realized; however, we are unable to estimate the possible loss or range of loss in excess of amounts accrued. Management believes that an adverse determination with respect to one or more of the MTBE cases could have a significant impact on results of operations during the period in which any said adverse determination occurs, but does not believe that any such adverse determination would have a material adverse effect on the Partnership’s consolidated financial position.

Regency Merger Litigation

Following the January 26, 2015 announcement of the Regency Merger, purported Regency unitholders filed lawsuits in state and federal courts in Dallas and Delaware asserting claims relating to the Regency Merger. All Regency Merger-related lawsuits have been dismissed, although one lawsuit remains pending on appeal. On June 10, 2015, Adrian Dieckman (“Dieckman”), a purported Regency unitholder, filed a class action complaint on behalf of Regency’s common unitholders in the Court of Chancery of the State of Delaware. The lawsuit alleges that the Regency Merger breached the Regency partnership agreement because Regency’s conflicts committee was not properly formed, and the Regency Merger was not approved in good faith. Defendants filed a motion to dismiss, and on March 29, 2016, the Delaware court granted Defendants’ motion and dismissed the lawsuit. On April 26, 2016, Dieckman filed his Notice of Appeal to the Supreme Court of Delaware. This appeal is styled Adrian Dieckman v. Regency GP LP, et al., No. 208, 2016, in the Supreme Court of the State of Delaware. Dieckman filed his Opening Brief on June 9, 2016, and Defendants’ filed their Answering Brief on July 29, 2016. On August 31, 2016, Dieckman filed his Reply Brief. Oral argument is scheduled for November 16, 2016 before the Delaware Supreme Court.

Enterprise Products Partners, L.P. and Enterprise Products Operating LLC Litigation

On January 27, 2014, a trial commenced between ETP against Enterprise Products Partners, L.P. and Enterprise Products Operating LLC (collectively, “Enterprise”) and Enbridge (US) Inc. Trial resulted in a verdict in favor of ETP against Enterprise that consisted of $319 million in compensatory damages and $595 million in disgorgement to ETP. The jury also found that ETP owed Enterprise approximately $1 million under a reimbursement agreement. On July 29, 2014, the trial court entered a final judgment in favor of ETP and awarded ETP $536 million , consisting of compensatory damages, disgorgement, and pre-judgment interest. The trial court also ordered that ETP shall be entitled to recover post-judgment interest and costs of court and that Enterprise is not entitled to any net recovery on its counterclaims. Enterprise has filed a notice of appeal with the Texas Court of Appeals, and briefing by Enterprise and ETP is complete. Oral argument was held on April 20, 2016. The

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Court of Appeals is taking the briefs under advisement. In accordance with GAAP, no amounts related to the original verdict or the July 29, 2014 final judgment will be recorded in our financial statements until the appeal process is completed.

Other Litigation and Contingencies

We or our subsidiaries are a party to various legal proceedings and/or regulatory proceedings incidental to our businesses. For each of these matters, we evaluate the merits of the case, our exposure to the matter, possible legal or settlement strategies, the likelihood of an unfavorable outcome and the availability of insurance coverage. If we determine that an unfavorable outcome of a particular matter is probable and can be estimated, we accrue the contingent obligation, as well as any expected insurance recoverable amounts related to the contingency. As of September 30, 2016 and December 31, 2015 , accruals of approximately $56 million and $40 million , respectively, were reflected on our consolidated balance sheets related to these contingent obligations. As new information becomes available, our estimates may change. The impact of these changes may have a significant effect on our results of operations in a single period.

The outcome of these matters cannot be predicted with certainty and there can be no assurance that the outcome of a particular matter will not result in the payment of amounts that have not been accrued for the matter. Furthermore, we may revise accrual amounts prior to resolution of a particular contingency based on changes in facts and circumstances or changes in the expected outcome. Currently, we are not able to estimate possible losses or a range of possible losses in excess of amounts accrued.

No amounts have been recorded in our September 30, 2016 or December 31, 2015 consolidated balance sheets for contingencies and current litigation, other than amounts disclosed herein.

Attorney General of the Commonwealth of Massachusetts v. New England Gas Company.

On July 7, 2011, the Massachusetts Attorney General (“AG”) filed a regulatory complaint with the Massachusetts Department of Public Utilities (“MDPU”) against New England Gas Company with respect to certain environmental cost recoveries. The AG is seeking a refund to New England Gas Company customers for alleged “excessive and imprudently incurred costs” related to legal fees associated with Southern Union’s environmental response activities. In the complaint, the AG requests that the MDPU initiate an investigation into the New England Gas Company’s collection and reconciliation of recoverable environmental costs including: (i) the prudence of any and all legal fees, totaling approximately $19 million , that were charged by the Kasowitz, Benson, Torres & Friedman firm and passed through the recovery mechanism since 2005, the year when a partner in the firm, the Southern Union former Vice Chairman, President and Chief Operating Officer, joined Southern Union’s management team; (ii) the prudence of any and all legal fees that were charged by the Bishop, London & Dodds firm and passed through the recovery mechanism since 2005, the period during which a member of the firm served as Southern Union’s Chief Ethics Officer; and (iii) the propriety and allocation of certain legal fees charged that were passed through the recovery mechanism that the AG contends only qualify for a lesser, 50% , level of recovery. Southern Union has filed its answer denying the allegations and moved to dismiss the complaint, in part on a theory of collateral estoppel. The hearing officer has deferred consideration of Southern Union’s motion to dismiss. The AG’s motion to be reimbursed expert and consultant costs by Southern Union of up to $150,000 was granted. By tariff, these costs are recoverable through rates charged to New England Gas Company customers. The hearing officer previously stayed discovery pending resolution of a dispute concerning the applicability of attorney-client privilege to legal billing invoices. The MDPU issued an interlocutory order on June 24, 2013 that lifted the stay, and discovery has resumed. Panhandle (as successor to Southern Union) believes it has complied with all applicable requirements regarding its filings for cost recovery and has not recorded any accrued liability; however, Panhandle will continue to assess its potential exposure for such cost recoveries as the matter progresses.

Compliance Orders from the New Mexico Environmental Department

Regency received a Notice of Violation from the New Mexico Environmental Department on September 23, 2015 for allegations of violations of New Mexico air regulations related to Jal #3. The Partnership has accrued $250,000 related to the claims and will continue to assess its potential exposure to the allegations as the matter progresses.

Lone Star NGL Fractionators Notice of Enforcement

Lone Star NGL Fractionators received a Notice of Enforcement from the Texas Commission on Environmental Quality on August 28, 2015 for allegations of violations of Texas air regulations related to its Mont Belvieu Gas Plant. The Partnership has accrued $50,000 related to this claim. As of September 2016, the Agreed Order is in the approval process with the Texas Commission on Environmental Quality and includes a $21,000 Supplemental Environmental Project.

Environmental Matters

Our operations are subject to extensive federal, tribal, state and local environmental and safety laws and regulations that require expenditures to ensure compliance, including related to air emissions and wastewater discharges, at operating facilities

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and for remediation at current and former facilities as well as waste disposal sites. Although we believe our operations are in substantial compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in the business of transporting, storing, gathering, treating, compressing, blending and processing natural gas, natural gas liquids and other products. As a result, there can be no assurance that significant costs and liabilities will not be incurred. Costs 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 result in the assessment of administrative, civil and criminal penalties, the imposition of investigatory, remedial and corrective action obligations, the issuance of injunctions in affected areas and the filing of federally authorized citizen suits. Contingent losses related to all significant known environmental matters have been accrued and/or separately disclosed. However, we may revise accrual amounts prior to resolution of a particular contingency based on changes in facts and circumstances or changes in the expected outcome.

Environmental exposures and liabilities are difficult to assess and estimate due to unknown factors such as the magnitude of possible contamination, the timing and extent of remediation, the determination of our liability in proportion to other parties, improvements in cleanup technologies and the extent to which environmental laws and regulations may change in the future. Although environmental costs may have a significant impact on the results of operations for any single period, we believe that such costs will not have a material adverse effect on our financial position.

Based on information available at this time and reviews undertaken to identify potential exposure, we believe the amount reserved for environmental matters is adequate to cover the potential exposure for cleanup costs.

Environmental Remediation

Our subsidiaries are responsible for environmental remediation at certain sites, including the following:


•	Certain of our interstate pipelines conduct soil and groundwater remediation related to contamination from past uses of PCBs. PCB assessments are ongoing and, in some cases, our subsidiaries could potentially be held responsible for contamination caused by other parties.


•	Certain gathering and processing systems are responsible for soil and groundwater remediation related to releases of hydrocarbons.


•	Legacy sites related to Sunoco, Inc., that are subject to environmental assessments include formerly owned terminals and other logistics assets, retail sites that Sunoco, Inc. no longer operates, closed and/or sold refineries and other formerly owned sites.

•

Sunoco, Inc. is potentially subject to joint and several liability for the costs of remediation at sites at which it has been identified as a potentially responsible party (“PRP”). As of September 30, 2016 , Sunoco, Inc. had been named as a PRP at approximately 50 identified or potentially identifiable “Superfund” sites under federal and/or comparable state law. Sunoco, Inc. is usually one of a number of companies identified as a PRP at a site. Sunoco, Inc. has reviewed the nature and extent of its involvement at each site and other relevant circumstances and, based upon Sunoco, Inc.’s purported nexus to the sites, believes that its potential liability associated with such sites will not be significant.

To the extent estimable, expected remediation costs are included in the amounts recorded for environmental matters in our consolidated balance sheets. In some circumstances, future costs cannot be reasonably estimated because remediation activities are undertaken as claims are made by customers and former customers. To the extent that an environmental remediation obligation is recorded by a subsidiary that applies regulatory accounting policies, amounts that are expected to be recoverable through tariffs or rates are recorded as regulatory assets on our consolidated balance sheets.

The table below reflects the amounts of accrued liabilities recorded in our consolidated balance sheets related to environmental matters that are considered to be probable and reasonably estimable. Currently, we are not able to estimate possible losses or a range of possible losses in excess of amounts accrued. Except for matters discussed above, we do not have any material environmental matters assessed as reasonably possible that would require disclosure in our consolidated financial statements.



	September 30, 2016		December 31, 2015
Current	$	42	$	41
Non-current	279		326
Total environmental liabilities	$	321	$	367

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In 2013, we established a wholly-owned captive insurance company to bear certain risks associated with environmental obligations related to certain sites that are no longer operating. The premiums paid to the captive insurance company include estimates for environmental claims that have been incurred but not reported, based on an actuarially determined fully developed claims expense estimate. In such cases, we accrue losses attributable to unasserted claims based on the discounted estimates that are used to develop the premiums paid to the captive insurance company.

During the three months ended September 30, 2016 and 2015 , Sunoco, Inc. recorded $10 million and $9 million , respectively, of expenditures related to environmental cleanup programs. During the nine months ended September 30, 2016 and 2015 , Sunoco, Inc. recorded $24 million and $27 million , respectively, of expenditures related to environmental cleanup programs.

On December 2, 2010, Sunoco, Inc. entered an Asset Sale and Purchase Agreement to sell the Toledo Refinery to Toledo Refining Company LLC (“TRC”) wherein Sunoco, Inc. retained certain liabilities associated with the pre-Closing time period. On January 2, 2013, USEPA issued a Finding of Violation (“FOV”) to TRC and, on September 30, 2013, EPA issued an NOV/FOV to TRC alleging Clean Air Act violations. To date, EPA has not issued an FOV or NOV/FOV to Sunoco, Inc. directly but some of EPA’s claims relate to the time period that Sunoco, Inc. operated the refinery. Specifically, EPA has claimed that the refinery flares were not operated in a manner consistent with good air pollution control practice for minimizing emissions and/or in conformance with their design, and that Sunoco, Inc. submitted semi-annual compliance reports in 2010 and 2011 that failed to include all of the information required by the regulations. EPA has proposed penalties in excess of $200,000 to resolve the allegations and discussions continue between the parties. The timing or outcome of this matter cannot be reasonably determined at this time, however, we do not expect there to be a material impact to our results of operations, cash flows or financial position.

Our pipeline operations are subject to regulation by the U.S. Department of Transportation under the PHMSA, pursuant to which the PHMSA has established requirements relating to the design, installation, testing, construction, operation, replacement and management of pipeline facilities. Moreover, the PHMSA, through the Office of Pipeline Safety, has promulgated a rule requiring pipeline operators to develop integrity management programs to comprehensively evaluate their pipelines, and take measures to protect pipeline segments located in what the rule refers to as “high consequence areas.” Activities under these integrity management programs involve the performance of internal pipeline inspections, pressure testing or other effective means to assess the integrity of these regulated pipeline segments, and the regulations require prompt action to address integrity issues raised by the assessment and analysis. Integrity testing and assessment of all of these assets will continue, and the potential exists that results of such testing and assessment could cause us to incur future capital and operating expenditures for repairs or upgrades deemed necessary to ensure the continued safe and reliable operation of our pipelines; however, no estimate can be made at this time of the likely range of such expenditures.

In January 2012, Sunoco Logistics experienced a release on its products pipeline in Wellington, Ohio. In connection with this release, the PHMSA issued a Corrective Action Order under which Sunoco Logistics is obligated to follow specific requirements in the investigation of the release and the repair and reactivation of the pipeline. Sunoco Logistics also entered into an Order on Consent with the EPA regarding the environmental remediation of the release site. All requirements of the Order on Consent with the EPA have been fulfilled and the Order has been satisfied and closed. Sunoco Logistics has also received a "No Further Action" approval from the Ohio EPA for all soil and groundwater remediation requirements. In May 2016, Sunoco Logistics received a proposed penalty from the EPA and U.S. Department of Justice associated with this release, and continues to work with the involved parties to bring this matter to closure. The timing and outcome of this matter cannot be reasonably determined at this time. However, Sunoco Logistics does not expect there to be a material impact to its results of operations, cash flows or financial position.

In June 2016, the PHMSA issued Notices of Probable Violation ("NOPV") and a proposed compliance order (“PCO”) in connection with alleged violations on Sunoco Logistics’ Texas crude oil pipeline system. The proposed penalties are in excess of $100,000 , and Sunoco Logistics is currently in discussions with PHMSA to resolve these matters. The timing or outcome of these matters cannot be reasonably determined at this time, however, Sunoco Logistics does not expect there to be a material impact to its results of operations, cash flows, or financial position.

In July 2016, the PHMSA issued a NOPV and PCO in connection with inspection and maintenance activities related to a 2013 incident on Sunoco Logistics' crude oil pipeline near Wortham, Texas. The proposed penalties are in excess of $100,000 , and Sunoco Logistics is currently in discussions with PHMSA to resolve these matters. The timing or outcome of these matters cannot be reasonably determined at this time, however, Sunoco Logistics does not expect there to be a material impact to its results of operations, cash flows, or financial position.

Our operations are also subject to the requirements of the OSHA, and comparable state laws that regulate the protection of the health and safety of employees. In addition, OSHA’s hazardous communication standard requires that information be maintained about hazardous materials used or produced in our operations and that this information be provided to employees,

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state and local government authorities and citizens. We believe that past costs for OSHA required activities, including general industry standards, record keeping requirements, and monitoring of occupational exposure to regulated substances have not had a material adverse effect on our results of operations but there is no assurance that such costs will not be material in the future.


11.	DERIVATIVE ASSETS AND LIABILITIES

Commodity Price Risk

We are exposed to market risks related to the volatility of commodity prices. To manage the impact of volatility from these prices, we utilize various exchange-traded and OTC commodity financial instrument contracts. These contracts consist primarily of futures, swaps and options and are recorded at fair value in our consolidated balance sheets.

We use futures and basis swaps, designated as fair value hedges, to hedge our natural gas inventory stored in our Bammel storage facility. At hedge inception, we lock in a margin by purchasing gas in the spot market or off peak season and entering into a financial contract. Changes in the spreads between the forward natural gas prices and the physical inventory spot price result in unrealized gains or losses until the underlying physical gas is withdrawn and the related designated derivatives are settled. Once the gas is withdrawn and the designated derivatives are settled, the previously unrealized gains or losses associated with these positions are realized.

We use futures, swaps and options to hedge the sales price of natural gas we retain for fees in our intrastate transportation and storage segment and operational gas sales on our interstate transportation and storage segment. These contracts are not designated as hedges for accounting purposes.

We use NGL and crude derivative swap contracts to hedge forecasted sales of NGL and condensate equity volumes we retain for fees in our midstream segment whereby our subsidiaries generally gather and process natural gas on behalf of producers, sell the resulting residue gas and NGL volumes at market prices and remit to producers an agreed upon percentage of the proceeds based on an index price for the residue gas and NGL. These contracts are not designated as hedges for accounting purposes.

We use derivatives in our liquids transportation and services segment to manage our storage facilities and the purchase and sale of purity NGL. These contracts are not designated as hedges for accounting purposes.

Sunoco Logistics utilizes swaps, futures and other derivative instruments to mitigate the risk associated with market movements in the price of refined products and NGLs. These contracts are not designated as hedges for accounting purposes.

We use futures and swaps to achieve ratable pricing of crude oil purchases, to convert certain expected refined product sales to fixed or floating prices, to lock in margins for certain refined products and to lock in the price of a portion of natural gas purchases or sales and transportation costs in our retail marketing segment. These contracts are not designated as hedges for accounting purposes.

We use financial commodity derivatives to take advantage of market opportunities in our trading activities which complement our transportation and storage segment’s operations and are netted in cost of products sold in our consolidated statements of operations. We also have trading and marketing activities related to power and natural gas in our all other segment which are also netted in cost of products sold. As a result of our trading activities and the use of derivative financial instruments in our transportation and storage segment, the degree of earnings volatility that can occur may be significant, favorably or unfavorably, from period to period. We attempt to manage this volatility through the use of daily position and profit and loss reports provided to our risk oversight committee, which includes members of senior management, and the limits and authorizations set forth in our commodity risk management policy.

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The following table details our outstanding commodity-related derivatives:



	September 30, 2016			December 31, 2015
	Notional Volume		Maturity	Notional Volume		Maturity
Mark-to-Market Derivatives
(Trading)
Natural Gas (MMBtu):
Fixed Swaps/Futures	1,262,500		2016-2017	(602,500	)	2016-2017
Basis Swaps IFERC/NYMEX ⁽¹⁾	60,102,500		2016-2017	(31,240,000	)	2016-2017
Power (Megawatt):
Forwards	419,824		2016-2017	357,092		2016-2017
Futures	99,247		2016-2017	(109,791	)	2016
Options – Puts	(536,400	)	2016	260,534		2016
Options – Calls	1,080,400		2016-2017	1,300,647		2016
Crude (Bbls):
Futures	(656,000	)	2016-2017	(591,000	)	2016-2017
(Non-Trading)
Natural Gas (MMBtu):
Basis Swaps IFERC/NYMEX	4,762,500		2016-2017	(6,522,500	)	2016-2017
Swing Swaps IFERC	13,072,500		2016-2017	71,340,000		2016-2017
Fixed Swaps/Futures	(35,962,500	)	2016-2018	(14,380,000	)	2016-2018
Forward Physical Contracts	(6,834,328	)	2016-2017	21,922,484		2016-2017
Natural Gas Liquid (Bbls) – Forwards/Swaps	(13,519,200	)	2016-2017	(8,146,800	)	2016-2018
Refined Products (Bbls) – Futures	(1,970,000	)	2016-2017	(993,000	)	2016-2017
Corn (Bushels) – Futures	—		—	1,185,000		2016
Fair Value Hedging Derivatives
(Non-Trading)
Natural Gas (MMBtu):
Basis Swaps IFERC/NYMEX	(30,620,000	)	2016-2017	(37,555,000	)	2016
Fixed Swaps/Futures	(30,620,000	)	2016-2017	(37,555,000	)	2016
Hedged Item – Inventory	30,620,000		2016-2017	37,555,000		2016


⁽¹⁾	Includes aggregate amounts for open positions related to Houston Ship Channel, Waha Hub, NGPL TexOk, West Louisiana Zone and Henry Hub locations.

Interest Rate Risk

We are exposed to market risk for changes in interest rates. To maintain a cost effective capital structure, we borrow funds using a mix of fixed rate debt and variable rate debt. We also manage our interest rate exposure by utilizing interest rate swaps to achieve a desired mix of fixed and variable rate debt. We also utilize forward starting interest rate swaps to lock in the rate on a portion of our anticipated debt issuances.

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The following table summarizes our interest rate swaps outstanding, none of which were designated as hedges for accounting purposes:



Term	Type ⁽¹⁾	Notional Amount Outstanding
Term	Type ⁽¹⁾	September 30, 2016		December 31, 2015
July 2016 ⁽²⁾⁽⁴⁾	Forward-starting to pay a fixed rate of 3.80% and receive a floating rate	$	—	$	200
July 2017 ⁽³⁾⁽⁴⁾	Forward-starting to pay a fixed rate of 3.90% and receive a floating rate	500		300
July 2018 ⁽³⁾	Forward-starting to pay a fixed rate of 4.00% and receive a floating rate	200		200
December 2018	Pay a floating rate based on a 3-month LIBOR and receive a fixed rate of 1.53%	1,200		1,200
March 2019	Pay a floating rate based on a 3-month LIBOR and receive a fixed rate of 1.42%	300		300
July 2019 ⁽³⁾	Forward-starting to pay a fixed rate of 3.25% and receive a floating rate	200		200


⁽¹⁾	Floating rates are based on 3-month LIBOR.


⁽²⁾	Represents the effective date. These forward-starting swaps have terms of 10 and 30 years with a mandatory termination date the same as the effective date.


⁽³⁾	Represents the effective date. These forward-starting swaps have terms of 30 years with a mandatory termination date the same as the effective date.


⁽⁴⁾	ETP previously had outstanding forward starting interest rate swaps, which were scheduled to expire in July 2016, with a total notional value of $200 million . In June 2016, ETP extended the expiration of those swaps to July 2017.

Credit Risk

Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a loss to the Partnership. Credit policies have been approved and implemented to govern the Partnership’s portfolio of counterparties with the objective of mitigating credit losses. These policies establish guidelines, controls and limits to manage credit risk within approved tolerances by mandating an appropriate evaluation of the financial condition of existing and potential counterparties, monitoring agency credit ratings, and by implementing credit practices that limit exposure according to the risk profiles of the counterparties. Furthermore, the Partnership may, at times, require collateral under certain circumstances to mitigate credit risk as necessary. The Partnership also uses industry standard commercial agreements which allow for the netting of exposures associated with transactions executed under a single commercial agreement. Additionally, we utilize master netting agreements to offset credit exposure across multiple commercial agreements with a single counterparty or affiliated group of counterparties.

The Partnership’s counterparties consist of a diverse portfolio of customers across the energy industry, including petrochemical companies, commercial and industrials, oil and gas producers, municipalities, gas and electric utilities, midstream companies and independent power generators. Our overall exposure may be affected positively or negatively by macroeconomic or regulatory changes that impact our counterparties to one extent or another. Currently, management does not anticipate a material adverse effect in our financial position or results of operations as a consequence of counterparty non-performance.

The Partnership has maintenance margin deposits with certain counterparties in the OTC market, primarily independent system operators, and with clearing brokers. Payments on margin deposits are required when the value of a derivative exceeds our pre-established credit limit with the counterparty. Margin deposits are returned to us on or about the settlement date for non-exchange traded derivatives, and we exchange margin calls on a daily basis for exchange traded transactions. Since the margin calls are made daily with the exchange brokers, the fair value of the financial derivative instruments are deemed current and netted in deposits paid to vendors within other current assets in the consolidated balance sheets.

For financial instruments, failure of a counterparty to perform on a contract could result in our inability to realize amounts that have been recorded on our consolidated balance sheets and recognized in net income or other comprehensive income.

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Derivative Summary

The following table provides a summary of our derivative assets and liabilities:



	Fair Value of Derivative Instruments
	Asset Derivatives				Liability Derivatives
	September 30, 2016		December 31, 2015		September 30, 2016			December 31, 2015
Derivatives designated as hedging instruments:
Commodity derivatives (margin deposits)	$	—	$	38	$	(2	)	$	(3	)
	—		38		(2		)	(3		)
Derivatives not designated as hedging instruments:
Commodity derivatives (margin deposits)	115		353		(141		)	(306		)
Commodity derivatives	26		57		(46		)	(41		)
Interest rate derivatives	18		—		(375		)	(171		)
Embedded derivatives in ETP Preferred Units	—		—		(1		)	(5		)
	159		410		(563		)	(523		)
Total derivatives	$	159	$	448	$	(565	)	$	(526	)

The following table presents the fair value of our recognized derivative assets and liabilities on a gross basis and amounts offset on the consolidated balance sheets that are subject to enforceable master netting arrangements or similar arrangements:



		Asset Derivatives						Liability Derivatives
	Balance Sheet Location	September 30, 2016			December 31, 2015			September 30, 2016			December 31, 2015
Derivatives without offsetting agreements	Derivative assets (liabilities)	$	18		$	—		$	(376	)	$	(176	)
Derivatives in offsetting agreements:
OTC contracts	Derivative assets (liabilities)	26			57			(46		)	(41		)
Broker cleared derivative contracts	Other current assets	115			391			(143		)	(309		)
Total gross derivatives		159			448			(565		)	(526		)
Offsetting agreements:
Counterparty netting	Derivative assets (liabilities)	(3		)	(17		)	3			17
Payments on margin deposit	Other current assets	(115		)	(309		)	115			309
Total net derivatives		$	41		$	122		$	(447	)	$	(200	)

We disclose the non-exchange traded financial derivative instruments as price risk management assets and liabilities on our consolidated balance sheets at fair value with amounts classified as either current or long-term depending on the anticipated settlement date.

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The following tables summarize the amounts recognized with respect to our derivative financial instruments:



	Change in Value Recognized in OCI on Derivatives (Effective Portion)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Derivatives in cash flow hedging relationships:
Commodity derivatives	$	—	$	—	$	—	$	1
Total	$	—	$	—	$	—	$	1



	Location of Gain/(Loss) Recognized in Income on Derivatives	Amount of Gain/(Loss) Recognized in Income Representing Hedge Ineffectiveness and Amount Excluded from the Assessment of Effectiveness
		Three Months Ended September 30,						Nine Months Ended September 30,
		2016			2015			2016		2015
Derivatives in fair value hedging relationships (including hedged item):
Commodity derivatives	Cost of products sold	$	(9	)	$	(1	)	$	8	$	7
Total		$	(9	)	$	(1	)	$	8	$	7



	Location of Gain/(Loss) Recognized in Income on Derivatives	Amount of Gain/(Loss) Recognized in Income on Derivatives
		Three Months Ended September 30,						Nine Months Ended September 30,
		2016			2015			2016			2015
Derivatives not designated as hedging instruments:
Commodity derivatives – Trading	Cost of products sold	$	(8	)	$	(2	)	$	(24	)	$	(10	)
Commodity derivatives – Non-trading	Cost of products sold	(14		)	48			(57		)	—
Interest rate derivatives	Losses on interest rate derivatives	(28		)	(64		)	(179		)	(14		)
Embedded derivatives	Other, net	8			6			4			10
Total		$	(42	)	$	(12	)	$	(256	)	$	(14	)


12.	RELATED PARTY TRANSACTIONS

ETE has agreements with subsidiaries to provide or receive various management and general and administrative services. ETE pays us to provide services on its behalf and on behalf of other subsidiaries of ETE, which includes the reimbursement of various operating and general and administrative expenses incurred by us on behalf of ETE and its subsidiaries.

The Partnership also has related party transactions with several of its equity method investees. In addition to commercial transactions, these transactions include the provision of certain management services and leases of certain assets.

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The following table summarizes the affiliate revenues on our consolidated statements of operations:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Affiliated revenues	$	63	$	94	$	270	$	300

The following table summarizes the related company balances on our consolidated balance sheets:



	September 30, 2016		December 31, 2015
Accounts receivable from related companies:
ETE	$	31	$	110
Sunoco LP	26		3
PES	8		10
FGT	13		13
Lake Charles LNG	41		36
Trans-Pecos Pipeline, LLC	1		29
Comanche Trail Pipeline, LLC	—		22
Other	24		45
Total accounts receivable from related companies:	$	144	$	268

Accounts payable to related companies:
ETE	$	6	$	1
Sunoco LP	10		5
FGT	1		1
Lake Charles LNG	2		3
Other	—		15
Total accounts payable to related companies:	$	19	$	25

The following table summarizes the related company balances on our consolidated balance sheets:



	September 30, 2016			December 31, 2015
Long-term notes receivable (payable) – related companies:
Sunoco LP	$	49		$	(233	)
Phillips 66	(83		)	—
Net long-term notes receivable (payable) – related companies	$	(34	)	$	(233	)


13.	REPORTABLE SEGMENTS

Our financial statements currently reflect the following reportable segments, which conduct their business in the United States, as follows:

• intrastate transportation and storage;

• interstate transportation and storage;

• midstream;

• liquids transportation and services;

• investment in Sunoco Logistics;

• retail marketing; and

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• all other.

Intersegment and intrasegment transactions are generally based on transactions made at market-related rates. Consolidated revenues and expenses reflect the elimination of all material intercompany transactions.

Revenues from our intrastate transportation and storage segment are primarily reflected in natural gas sales and gathering, transportation and other fees. Revenues from our interstate transportation and storage segment are primarily reflected in gathering, transportation and other fees. Revenues from our midstream segment are primarily reflected in natural gas sales, NGL sales and gathering, transportation and other fees. Revenues from our liquids transportation and services segment are primarily reflected in NGL sales and gathering, transportation and other fees. Revenues from our investment in Sunoco Logistics segment are primarily reflected in crude sales. Revenues from our retail marketing segment are primarily reflected in refined product sales.

We report Segment Adjusted EBITDA as a measure of segment performance. We define Segment Adjusted EBITDA as earnings before interest, taxes, depreciation, depletion, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, non-cash impairment charges, losses on extinguishments of debt and other non-operating income or expense items. Unrealized gains and losses on commodity risk management activities include unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Segment Adjusted EBITDA reflects amounts for unconsolidated affiliates based on the Partnership’s proportionate ownership.

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The following tables present financial information by segment:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Revenues:
Intrastate transportation and storage:
Revenues from external customers	$	583		$	477		$	1,457		$	1,504
Intersegment revenues	175			115			400			243
	758			592			1,857			1,747
Interstate transportation and storage:
Revenues from external customers	231			245			714			755
Intersegment revenues	5			3			15			12
	236			248			729			767
Midstream:
Revenues from external customers	587			539			1,804			2,055
Intersegment revenues	756			840			1,961			1,715
	1,343			1,379			3,765			3,770
Liquids transportation and services:
Revenues from external customers	1,094			783			3,022			2,378
Intersegment revenues	113			75			214			143
	1,207			858			3,236			2,521
Investment in Sunoco Logistics:
Revenues from external customers	2,154			2,379			6,133			8,026
Intersegment revenues	35			27			101			155
	2,189			2,406			6,234			8,181
Retail marketing:
Revenues from external customers	—			1,362			—			11,701
Intersegment revenues	—			1			—			4
	—			1,363			—			11,705
All other:
Revenues from external customers	882			816			2,171			2,048
Intersegment revenues	74			160			350			391
	956			976			2,521			2,439
Eliminations	(1,158		)	(1,221		)	(3,041		)	(2,663		)
Total revenues	$	5,531		$	6,601		$	15,301		$	28,467

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Segment Adjusted EBITDA:
Intrastate transportation and storage	$	133		$	127		$	461		$	421
Interstate transportation and storage	278			286			848			872
Midstream	314			315			875			977
Liquids transportation and services	240			195			687			518
Investment in Sunoco Logistics	312			289			906			836
Retail marketing	83			195			208			464
All other	30			93			187			266
Total	1,390			1,500			4,172			4,354
Depreciation, depletion and amortization	(503		)	(471		)	(1,469		)	(1,451		)
Interest expense, net	(345		)	(333		)	(981		)	(979		)
Losses on interest rate derivatives	(28		)	(64		)	(179		)	(14		)
Non-cash unit-based compensation expense	(22		)	(16		)	(60		)	(59		)
Unrealized gains (losses) on commodity risk management activities	(15		)	47			(96		)	(72		)
Inventory valuation adjustments	37			(134		)	143			16
Losses on extinguishments of debt	—			(10		)	—			(43		)
Adjusted EBITDA related to unconsolidated affiliates	(240		)	(350		)	(711		)	(711		)
Equity in earnings of unconsolidated affiliates	65			214			260			388
Impairment of investment in an unconsolidated affiliate	(308		)	—			(308		)	—
Other, net	43			32			84			51
Income before income tax benefit	$	74		$	415		$	855		$	1,480



	September 30, 2016		December 31, 2015
Assets:
Intrastate transportation and storage	$	5,072	$	4,882
Interstate transportation and storage	11,379		11,345
Midstream	17,740		17,111
Liquids transportation and services	10,159		7,235
Investment in Sunoco Logistics	17,255		15,423
Retail marketing	1,568		3,218
All other	4,754		5,959
Total assets	$	67,927	$	65,173

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(Tabular dollar and unit amounts, except per unit data, are in millions)

The following is a discussion of our historical consolidated financial condition and results of operations, and should be read in conjunction with (i) our historical consolidated financial statements and accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q; (ii) our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 29, 2016 ; and (iii) our management’s discussion and analysis of financial condition and results of operations included in our 2015 Form 10-K. This discussion includes forward-looking statements that are subject to risk and uncertainties. Actual results may differ substantially from the statements we make in this section due to a number of factors that are discussed in “Part I – Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2015 .

References to “we,” “us,” “our,” the “Partnership” and “ETP” shall mean Energy Transfer Partners, L.P. and its subsidiaries.

OVERVIEW

The primary activities and operating subsidiaries through which we conduct those activities are as follows:


•	Natural gas operations, including the following:


•	natural gas midstream and intrastate transportation and storage; and


•	interstate natural gas transportation and storage through ET Interstate and Panhandle. ET Interstate is the parent company of Transwestern, ETC FEP, ETC Tiger, CrossCountry, ETC MEP and ET Rover. Panhandle is the parent company of the Trunkline and Sea Robin transmission systems.


•	Liquids operations, including NGL transportation, storage and fractionation services.


•	Product and crude oil transportation, terminalling services and acquisition and marketing activities through Sunoco Logistics.

RECENT DEVELOPMENTS

Sunoco Retail to Sunoco LP

Bakken Financing

Bakken Equity Sale

PennTex Acquisition

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recorded at fair value as of the acquisition date, and the initial measurement of fair value is not yet complete.

Sunoco Logistics’ Vitol Acquisition

Sunoco Logistics’ Permian Express Partners

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Results of Operations

Consolidated Results



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			Change			2016			2015			Change
Segment Adjusted EBITDA:
Intrastate transportation and storage	$	133		$	127		$	6		$	461		$	421		$	40
Interstate transportation and storage	278			286			(8		)	848			872			(24		)
Midstream	314			315			(1		)	875			977			(102		)
Liquids transportation and services	240			195			45			687			518			169
Investment in Sunoco Logistics	312			289			23			906			836			70
Retail marketing	83			195			(112		)	208			464			(256		)
All other	30			93			(63		)	187			266			(79		)
Total	1,390			1,500			(110		)	4,172			4,354			(182		)
Depreciation, depletion and amortization	(503		)	(471		)	(32		)	(1,469		)	(1,451		)	(18		)
Interest expense, net	(345		)	(333		)	(12		)	(981		)	(979		)	(2		)
Losses on extinguishments of debt	—			(10		)	10			—			(43		)	43
Losses on interest rate derivatives	(28		)	(64		)	36			(179		)	(14		)	(165		)
Non-cash unit-based compensation expense	(22		)	(16		)	(6		)	(60		)	(59		)	(1		)
Unrealized gains (losses) on commodity risk management activities	(15		)	47			(62		)	(96		)	(72		)	(24		)
Inventory valuation adjustments	37			(134		)	171			143			16			127
Adjusted EBITDA related to unconsolidated affiliates	(240		)	(350		)	110			(711		)	(711		)	—
Equity in earnings of unconsolidated affiliates	65			214			(149		)	260			388			(128		)
Impairment of investment in an unconsolidated affiliate	(308		)	—			(308		)	(308		)	—			(308		)
Other, net	43			32			11			84			51			33
Income before income tax (expense) benefit	74			415			(341		)	855			1,480			(625		)
Income tax (expense) benefit	64			(22		)	86			131			20			111
Net income	$	138		$	393		$	(255	)	$	986		$	1,500		$	(514	)

See the detailed discussion of Segment Adjusted EBITDA and Segment Operating Results.

Depreciation, Depletion and Amortization. Depreciation, depletion and amortization expense increased for the three and nine months ended September 30, 2016 compared to the same periods last year primarily due to increases from assets recently placed in service, partially offset by decreases of $28 million and $172 million , respectively, related to the deconsolidation of Sunoco, LLC and the legacy Sunoco, Inc. retail business.

Losses on Interest Rate Derivatives. Losses on interest rate derivatives during the three and nine months ended September 30, 2016 and 2015 were primarily attributable to the impact on our forward starting swap locks from the downward shift in the forward LIBOR curve.

Unrealized Gains (Losses) on Commodity Risk Management Activities. See discussion of the unrealized gains (losses) on commodity risk management activities included in “Segment Operating Results” below.

Inventory Valuation Adjustments. Inventory valuation reserve adjustments were recorded for the inventory associated with Sunoco Logistics’ crude oil, NGLs and refined products inventories as a result of commodity price changes during the respective periods.

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The three and nine months ended September 30, 2015 also reflected inventory valuation reserve adjustments of $4 million and $60 million , respectively, related to our retail marketing operations prior to our deconsolidation of these operations.

Adjusted EBITDA Related to Unconsolidated Affiliates and Equity in Earnings of Unconsolidated Affiliates. See additional information in “Supplemental Information on Unconsolidated Affiliates” and “Segment Operation Results” below.

Impairment of Investment in an Unconsolidated Affiliate. During the three months ended September 30, 2016 , the Partnership impaired its investment in MEP and recorded a non-cash impairment loss of $308 million based on commercial discussions with current and potential shippers on MEP regarding the outlook for long-term transportation contract rates.

Other, net. Includes amortization of regulatory assets and other income and expense amounts.

Income Tax (Expense) Benefit. For the three and nine months ended September 30, 2016 and 2015 compared to the same periods last year, the Partnership recorded lower income tax expense, or higher income tax benefit, primarily due to lower earnings among the Partnership’s consolidated corporate subsidiaries.

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Supplemental Information on Unconsolidated Affiliates

The following table presents financial information related to unconsolidated affiliates:



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			Change			2016			2015			Change
Equity in earnings (losses) of unconsolidated affiliates:
Citrus	$	31		$	29		$	2		$	80		$	77		$	3
FEP	12			14			(2		)	38			41			(3		)
PES	(26		)	39			(65		)	(25		)	77			(102		)
MEP	9			10			(1		)	31			33			(2		)
HPC	8			9			(1		)	23			24			(1		)
AmeriGas	(2		)	(2		)	—			15			2			13
Sunoco, LLC	—			(13		)	13			—			(13		)	13
Sunoco LP	16			117			(101		)	54			117			(63		)
Other	17			11			6			44			30			14
Total equity in earnings of unconsolidated affiliates	$	65		$	214		$	(149	)	$	260		$	388		$	(128	)

Adjusted EBITDA related to unconsolidated affiliates ⁽¹⁾ :
Citrus	$	90		$	88		$	2		$	251		$	242		$	9
FEP	19			19			—			56			56			—
PES	(19		)	46			(65		)	2			102			(100		)
MEP	22			23			(1		)	69			71			(2		)
HPC	15			16			(1		)	45			46			(1		)
Sunoco, LLC	—			53			(53		)	—			53			(53		)
Sunoco LP	83			81			2			208			81			127
Other	30			24			6			80			60			20
Total Adjusted EBITDA related to unconsolidated affiliates	$	240		$	350		$	(110	)	$	711		$	711		$	—

Distributions received from unconsolidated affiliates:
Citrus	$	50		$	65		$	(15	)	$	112		$	145		$	(33	)
FEP	17			19			(2		)	47			51			(4		)
AmeriGas	3			2			1			9			8			1
PES	—			15			(15		)	—			36			(36		)
MEP	17			20			(3		)	56			60			(4		)
HPC	13			14			(1		)	38			41			(3		)
Sunoco LP	36			—			36			102			—			102
Other	13			21			(8		)	40			41			(1		)
Total distributions received from unconsolidated affiliates	$	149		$	156		$	(7	)	$	404		$	382		$	22


⁽¹⁾	These amounts represent our proportionate share of the Adjusted EBITDA of our unconsolidated affiliates and are based on our equity in earnings or losses of our unconsolidated affiliates adjusted for our proportionate share of the unconsolidated affiliates’ interest, depreciation, depletion, amortization, non-cash items and taxes.

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Segment Operating Results

We evaluate segment performance based on Segment Adjusted EBITDA, which we believe is an important performance measure of the core profitability of our operations. This measure represents the basis of our internal financial reporting and is one of the performance measures used by senior management in deciding how to allocate capital resources among business segments.

The tables below identify the components of Segment Adjusted EBITDA, which is calculated as follows:


•	Gross margin, operating expenses, and selling, general and administrative expenses . These amounts represent the amounts included in our consolidated financial statements that are attributable to each segment.


•	Unrealized gains or losses on commodity risk management activities and inventory valuation adjustments . These are the unrealized amounts that are included in cost of products sold to calculate gross margin. These amounts are not included in Segment Adjusted EBITDA; therefore, the unrealized losses are added back and the unrealized gains are subtracted to calculate the segment measure.


•	Non-cash compensation expense . These amounts represent the total non-cash compensation recorded in operating expenses and selling, general and administrative expenses. This expense is not included in Segment Adjusted EBITDA and therefore is added back to calculate the segment measure.


•	Adjusted EBITDA related to unconsolidated affiliates . These amounts represent our proportionate share of the Adjusted EBITDA of our unconsolidated affiliates. Amounts reflected are calculated consistently with our definition of Adjusted EBITDA.

Intrastate Transportation and Storage



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			Change			2016			2015			Change
Natural gas transported (MMBtu/d)	8,088,132			8,308,105			(219,973		)	8,171,539			8,594,960			(423,421		)
Revenues	$	758		$	592		$	166		$	1,857		$	1,747		$	110
Cost of products sold	586			428			158			1,332			1,227			105
Gross margin	172			164			8			525			520			5
Unrealized (gains) losses on commodity risk management activities	(7		)	(4		)	(3		)	24			(3		)	27
Operating expenses, excluding non-cash compensation expense	(43		)	(43		)	—			(117		)	(121		)	4
Selling, general and administrative expenses, excluding non-cash compensation expense	(5		)	(6		)	1			(17		)	(21		)	4
Adjusted EBITDA related to unconsolidated affiliates	15			16			(1		)	45			46			(1		)
Other	1			—			1			1			—			1
Segment Adjusted EBITDA	$	133		$	127		$	6		$	461		$	421		$	40

Volumes . For the three and nine months ended September 30, 2016 compared to the same periods last year, transported volumes decreased primarily due to lower production volumes, primarily in the Barnett Shale region, partially offset by increased volumes related to significant new long-term transportation contracts.

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Gross Margin. The components of our intrastate transportation and storage segment gross margin were as follows:



	Three Months Ended September 30,							Nine Months Ended September 30,
	2016		2015		Change			2016		2015		Change
Transportation fees	$	122	$	123	$	(1	)	$	381	$	378	$	3
Natural gas sales and other	26		21		5			81		72		9
Retained fuel revenues	14		16		(2		)	34		46		(12		)
Storage margin, including fees	10		4		6			29		24		5
Total gross margin	$	172	$	164	$	8		$	525	$	520	$	5

Segment Adjusted EBITDA. For the three months ended September 30, 2016 compared to the same period last year, Segment Adjusted EBITDA related to our intrastate transportation and storage segment increased due to the net impacts of the following:


•	a decrease of $1 million in transportation fees due to lower throughput volumes;


•	an increase of $6 million in natural gas sales (excluding changes in unrealized losses of $1 million ) and other primarily due to higher realized gains from the buying and selling of gas along our system;


•	a decrease of $2 million from the sale of retained fuel primarily due to lower throughput volumes;


•	an increase of $2 million in storage margin (excluding net changes in unrealized amounts of $4 million related to fair value inventory adjustments and unrealized gains and losses on derivatives), as discussed below; and


•	a decrease of $1 million in general and administrative expenses due to lower insurance costs, as well as lower allocated overhead costs due to shared services cost savings.

Segment Adjusted EBITDA. For the nine months ended September 30, 2016 compared to the same period last year, Segment Adjusted EBITDA related to our intrastate transportation and storage segment increased due to the net impacts of the following:


•	an increase of $3 million in transportation fees despite lower throughput volumes, due to fees from renegotiated and newly initiated fixed fee contracts primarily on our Houston Pipeline system;


•	an increase of $14 million in natural gas sales (excluding changes in unrealized loss of $5 million ) primarily due to higher realized gains from the buying and selling gas along our system;


•	a decrease of $9 million from the sale of retained fuel (excluding changes in unrealized losses of $3 million ) primarily due to significantly lower market prices. The average spot price at the Houston Ship Channel location decreased 18% for the nine months ended September 30, 2016 compared to the same period last year;


•	an increase of $24 million in storage margin (excluding net changes in unrealized amounts of $19 million related to fair value inventory adjustments and unrealized gains and losses on derivatives), as discussed below;


•	a decrease of $4 million in operating expenses due to decreases in project related and office expenses; and


•	a decrease of $4 million in general and administrative expenses due to lower legal fees and insurance costs.

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Storage margin was comprised of the following:



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			Change			2016			2015			Change
Withdrawals from storage natural gas inventory (MMBtu)	11,547,500			—			11,547,500			33,205,000			15,782,500			17,422,500
Realized margin on natural gas inventory transactions	$	(3	)	$	(4	)	$	1		$	33		$	8		$	25
Fair value inventory adjustments	(4		)	(16		)	12			52			7			45
Unrealized gains (losses) on derivatives	12			19			(7		)	(74		)	(10		)	(64		)
Margin recognized on natural gas inventory, including related derivatives	5			(1		)	6			11			5			6
Revenues from fee-based storage	5			5			—			18			19			(1		)
Total storage margin	$	10		$	4		$	6		$	29		$	24		$	5

The changes in storage margin were primarily driven by the timing of withdrawals and sales of natural gas from our Bammel storage cavern.

Interstate Transportation and Storage



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			Change			2016			2015			Change
Natural gas transported (MMBtu/d)	5,385,679			5,903,285			(517,606		)	5,527,607			6,187,218			(659,611		)
Natural gas sold (MMBtu/d)	19,478			19,171			307			19,398			16,894			2,504
Revenues	$	236		$	248		$	(12	)	$	729		$	767		$	(38	)
Operating expenses, excluding non-cash compensation, amortization and accretion expenses	(76		)	(78		)	2			(223		)	(221		)	(2		)
Selling, general and administrative expenses, excluding non-cash compensation, amortization and accretion expenses	(13		)	(14		)	1			(36		)	(43		)	7
Adjusted EBITDA related to unconsolidated affiliates	131			130			1			376			369			7
Other	—			—			—			2			—			2
Segment Adjusted EBITDA	$	278		$	286		$	(8	)	$	848		$	872		$	(24	)

Volumes. For the three months ended September 30, 2016 compared to the same period last year, transported volumes decreased 346,817 MMBtu/d on the Trunkline pipeline primarily due to lower utilization resulting from lower customer demand, a decrease of 115,926 MMBtu/d on the Sea Robin pipeline due to reduced supply as a result of producer system maintenance and overall lower production, and a decrease of 107,178 MMBtu/d on the Transwestern pipeline due to lower customer demand in the West and San Juan areas, partially offset by opportunities in the Texas Intrastate markets.

Transported volumes for the nine months ended September 30, 2016 compared to the same period last year decreased 491,518 MMBtu/d on the Trunkline pipeline due to the transfer of one of the pipelines at Trunkline which was repurposed from natural gas service to crude oil service and lower utilization resulting from lower customer demand, and a decrease of 78,843 MMBtu/d on the Sea Robin pipeline due to reduced supply as a result of producer system maintenance and overall lower production.

Segment Adjusted EBITDA. For the three months ended September 30, 2016 compared to the same period last year, Segment Adjusted EBITDA related to our interstate transportation and storage segment decreased due to the net effect of the following:


•	a decrease of $9 million in revenues due to contract restructuring on the Tiger pipeline, a decrease of $6 million due to lower rates on the Panhandle, Trunkline and Transwestern pipelines due to weak spreads, and a decrease of $3 million on the Sea

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Robin pipeline due to declines in production and third party maintenance. These decreases were partially offset by higher reservation revenues on the Transwestern pipeline of $4 million from a growth project and higher parking revenues of $2 million , primarily on the Panhandle pipeline; partially offset by


•	a decrease of $2 million in operating expenses primarily due to lower maintenance projects and lower allocated costs; and


•	a decrease of $1 million in selling, general and administrative expenses primarily due to insurance proceeds received in 2016 and lower allocated costs.

Segment Adjusted EBITDA. For the nine months ended September 30, 2016 compared to the same period last year, Segment Adjusted EBITDA related to our interstate transportation and storage segment decreased due to the net effects of the following:

•

a decrease of $17 million in revenues due to contract restructuring on the Tiger pipeline, a decrease of $14 million due to the transfer of one of the Trunkline pipelines which was repurposed from natural gas service to crude oil service, a decrease of $11 million due to the expiration of a transportation rate schedule on the Transwestern pipeline, a decrease of $10 million due to lower reservation revenues on the Panhandle and Trunkline pipelines from capacity sold at lower rates and lower sales of capacity in the Phoenix area on the Transwestern pipeline, and a decrease of $8 million on the Sea Robin pipeline due to declines in production and third party maintenance. These decreases were partially offset by higher reservation revenues on the Transwestern pipeline of $16 million from sales of capacity in the East and West, primarily associated with a growth project, and higher parking revenues of $8 million , primarily on the Panhandle and Trunkline pipelines; partially offset by


•	an increase of $2 million in overall operating expenses primarily due to the prior period credit and settlement of ad valorem taxes in 2015 of $5 million , partially offset by lower maintenance project costs of $2 million due to scope and level of activity; and


•	a decrease of $7 million in overall selling, general and administrative expenses primarily due to $4 million in lower allocated costs and $3 million associated with insurance proceeds and a refund of franchise taxes.

Midstream



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			Change			2016			2015			Change
Gathered volumes (MMBtu/d)	9,675,003			10,384,106			(709,103		)	9,853,502			9,957,494			(103,992		)
NGLs produced (Bbls/d)	420,877			413,426			7,451			440,124			393,480			46,644
Equity NGLs (Bbls/d)	34,341			26,296			8,045			31,847			28,175			3,672
Revenues	$	1,343		$	1,379		$	(36	)	$	3,765		$	3,770		$	(5	)
Cost of products sold	867			915			(48		)	2,415			2,423			(8		)
Gross margin	476			464			12			1,350			1,347			3
Unrealized losses on commodity risk management activities	—			—			—			—			82			(82		)
Operating expenses, excluding non-cash compensation expense	(153		)	(148		)	(5		)	(453		)	(433		)	(20		)
Selling, general and administrative expenses, excluding non-cash compensation expense	(17		)	(9		)	(8		)	(42		)	(36		)	(6		)
Adjusted EBITDA related to unconsolidated affiliates	7			6			1			19			14			5
Other	1			2			(1		)	1			3			(2		)
Segment Adjusted EBITDA	$	314		$	315		$	(1	)	$	875		$	977		$	(102	)

Volumes. Gathered volumes decreased during the three and nine months ended September 30, 2016 compared to the same periods last year primarily due to declines in the South Texas, North Texas, and Mid-Continent/Panhandle regions. NGL production increased for the three and nine months ended September 30, 2016 compared to the same periods last year due to increased gathering and processing capacities in the Permian and Cotton Valley regions, partially offset by declines in the South Texas, North Texas, and Mid-Continent/Panhandle regions.

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Gross Margin . The components of our midstream segment gross margin were as follows:



	Three Months Ended September 30,							Nine Months Ended September 30,
	2016		2015		Change			2016		2015		Change
Gathering and processing fee-based revenues	$	393	$	418	$	(25	)	$	1,177	$	1,182	$	(5	)
Non fee-based contracts and processing	83		46		37			173		165		8
Total gross margin	$	476	$	464	$	12		$	1,350	$	1,347	$	3

Segment Adjusted EBITDA. For the three months ended September 30, 2016 compared to the same period last year, Segment Adjusted EBITDA related to our midstream segment decreased due to the net effects of the following:


•	an increase of $27 million in non-fee based margin due to volume increases in the Permian region, partially offset by volume declines in the South Texas, North Texas, and Mid-Continent/Panhandle regions; and


•	an increase of $10 million in non-fee based margins due to higher crude oil and NGL prices; offset by


•	a decrease of $25 million in fee-based margin due to volume declines in the South Texas, North Texas, and Mid-Continent/Panhandle regions, partially offset by increased gathering and processing volumes in the Permian and Cotton Valley regions; and


•	an increase in general and administrative expenses of $8 million primarily due to an increase of $3 million in insurance allocation from corporate, a decrease of $3 million in capitalized overhead, and an increase of $2 million in legal expenses.

Segment Adjusted EBITDA. For the nine months ended September 30, 2016 compared to the same period last year, Segment Adjusted EBITDA related to our midstream segment decreased due to the net effects of the following:


•	a decrease of $14 million in non-fee based margins due to lower natural gas prices and a $18 million decrease in non-fee based margins due to lower crude oil and NGL prices;


•	a decrease of $5 million in fee-based margin due to volume declines in the South Texas, North Texas, and Mid-Continent/Panhandle regions, partially offset by increased gathering and processing volumes in the Permian and Cotton Valley regions;


•	a decrease in gross margin of $85 million due to lower benefit from settled derivatives used to hedge commodity margins; and


•	an increase in operating expenses of $20 million primarily due to the King Ranch acquisition in the second quarter of 2015 and assets recently placed in service in the Permian and Eagle Ford regions; partially offset by


•	an increase of $39 million in non-fee based margin due to volume increases in the Permian region, partially offset by volume declines in the South Texas, North Texas, and Mid-Continent/Panhandle regions.

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Liquids Transportation and Services



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			Change			2016			2015			Change
Liquids transportation volumes (Bbls/d)	647,018			509,894			137,124			612,815			486,041			126,774
NGL fractionation volumes (Bbls/d)	338,237			228,695			109,542			349,986			231,161			118,825
Revenues	$	1,207		$	858		$	349		$	3,236		$	2,521		$	715
Cost of products sold	927			615			312			2,438			1,882			556
Gross margin	280			243			37			798			639			159
Unrealized (gains) losses on commodity risk management activities	5			(4		)	9			20			—			20
Operating expenses, excluding non-cash compensation expense	(43		)	(40		)	(3		)	(121		)	(114		)	(7		)
Selling, general and administrative expenses, excluding non-cash compensation expense	(2		)	(4		)	2			(12		)	(12		)	—
Adjusted EBITDA related to unconsolidated affiliates	—			—			—			2			5			(3		)
Segment Adjusted EBITDA	$	240		$	195		$	45		$	687		$	518		$	169

Volumes. For the three and nine months ended September 30, 2016 compared to the same periods last year, NGL transportation volumes increased in all major producing regions, including the Permian, North Texas, Southeast Texas, Eagle Ford, and Louisiana. Our crude pipeline, originating in Nederland and delivering into Lake Charles, also began transporting volumes in April 2016, and transported approximately 69,000 Bbls/d and 42,000 Bbls/d during the three and nine months ended September 30, 2016, respectively.

Average daily fractionated volumes increased for the three and nine months ended September 30, 2016 compared to the same periods last year due to the ramp-up of our third 100,000 Bbls/d fractionator at Mont Belvieu, Texas, which was commissioned in late December 2015, as well as increased producer volumes, as mentioned above.

Gross Margin. The components of our liquids transportation and services segment gross margin were as follows:



	Three Months Ended September 30,							Nine Months Ended September 30,
	2016		2015		Change			2016			2015		Change
Transportation margin	$	124	$	109	$	15		$	355		$	289	$	66
Processing and fractionation margin	103		76		27			296			217		79
Storage margin	50		41		9			148			124		24
Other margin	3		17		(14		)	(1		)	9		(10		)
Total gross margin	$	280	$	243	$	37		$	798		$	639	$	159

Segment Adjusted EBITDA. For the three and nine months ended September 30, 2016 compared to the same period last year, Segment Adjusted EBITDA related to our liquids transportation and services segment increased due to the net impacts of the following:


•	increases in transportation fees of $15 million and $66 million , respectively, primarily due to higher volumes transported out of the Permian and North Texas regions;

•

increases of $27 million and $79 million , respectively, in processing and fractionation margin (excluding changes in unrealized gains of $1 million for the three month period and unrealized losses of $2 million for the nine month period) primarily due to the ramp-up of our third 100,000 Bbls/d fractionator at Mont Belvieu, Texas, along with higher producer volumes, primarily from West Texas. Additionally, the three and nine months ended September 30, 2016 also reflect additional increases of $1 million and $19 million, respectively, from the commissioning of the Mariner South LPG export project during February 2015. Margin associated with our off-gas fractionator in Geismar, Louisiana decreased by $5 million for the nine months ended September 30, 2016 as NGL and olefin market prices decreased significantly for the comparable periods;

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•

increases in storage margin of $9 million and $24 million , respectively, partially due to an increase in demand for leased storage capacity as a result of favorable market conditions, which increased fee-based storage revenues by $2 million and $7 million, respectively. The remainder of the storage margin increases were primarily due to increases in throughput fees, as shuttle volumes increased for the three and nine months ended September 30, 2016 by 9% and 24%, respectively;


•	a decrease of $6 million and an increase of $8 million, respectively, in other margin (excluding increases in unrealized losses of $9 million and $18 million, respectively) primarily due to fluctuating optimization opportunities at our Mont Belvieu facility; and


•	increases in operating expenses of $3 million and $7 million , respectively, primarily due to increased costs associated with our third fractionator at Mont Belvieu.

Investment in Sunoco Logistics



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			Change			2016			2015			Change
Revenues	$	2,189		$	2,406		$	(217	)	$	6,234		$	8,181		$	(1,947	)
Cost of products sold	1,818			2,144			(326		)	5,116			7,240			(2,124		)
Gross margin	371			262			109			1,118			941			177
Unrealized (gains) losses on commodity risk management activities	16			(31		)	47			33			(9		)	42
Operating expenses, excluding non-cash compensation expense	(38		)	(40		)	2			(90		)	(116		)	26
Selling, general and administrative expenses, excluding non-cash compensation expense	(25		)	(23		)	(2		)	(72		)	(68		)	(4		)
Inventory valuation adjustments	(37		)	103			(140		)	(143		)	44			(187		)
Adjusted EBITDA related to unconsolidated affiliates	25			18			7			60			44			16
Segment Adjusted EBITDA	$	312		$	289		$	23		$	906		$	836		$	70

Segment Adjusted EBITDA. For the three months ended September 30, 2016 compared to the same period last year, Segment Adjusted EBITDA related to Sunoco Logistics increased due to the following:


•	an increase of $11 million from Sunoco Logistics’ NGLs operations, primarily attributable to increased volumes and fees from Sunoco Logistics’ Mariner NGLs projects of $23 million , which includes Sunoco Logistics’ NGLs pipelines and Marcus Hook and Nederland facilities; and

•

an increase of $26 million from Sunoco Logistics’ refined products operations, primarily due to improved operating results from Sunoco Logistics’ refined products pipelines of $11 million , which benefited from higher volumes on Sunoco Logistics’ Allegheny Access pipeline, and higher results from Sunoco Logistics’ refined products acquisition and marketing activities of $10 million . Improved contributions from joint venture interests of $3 million and Sunoco Logistics’ refined products terminals of $2 million also contributed to the increase; offset by

•

a decrease of $14 million from Sunoco Logistics’ crude oil operations, primarily due to lower operating results from Sunoco Logistics’ crude oil acquisition and marketing activities of $38 million , which includes transportation and storage fees related to Sunoco Logistics’ crude oil pipelines and terminal facilities, resulting from lower crude oil differentials compared to the prior year period. This decrease was partially offset by improved results from Sunoco Logistics’ crude oil pipelines of $21 million which benefited from the Delaware Basin Extension and Permian Longview and Louisiana Extension pipelines that commenced operations in the third quarter 2016. Higher contributions from joint venture interests of $4 million also contributed to the offset.

For the nine months ended September 30, 2016 compared to the same period last year, Segment Adjusted EBITDA related to Sunoco Logistics increased due to the net impacts of the following:


•	an increase of $63 million from Sunoco Logistics’ refined products operations, primarily due to improved operating results from Sunoco Logistics’ refined products pipelines of $29 million , which benefited from higher volumes on Sunoco Logistics’ Allegheny Access pipeline, and higher results from Sunoco Logistics’ refined products acquisition and marketing activities

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of $20 million . Higher earnings attributable to Sunoco Logistics’ refined products terminals of $7 million and improved contributions from joint venture interests of $7 million also contributed to the increase;

•

an increase of $6 million from Sunoco Logistics’ NGLs operations, primarily due to increased volumes and fees from Sunoco Logistics’ Mariner NGLs projects of $73 million , which includes Sunoco Logistics’ NGLs pipelines and Marcus Hook and Nederland facilities. These factors were largely offset by lower operating results from Sunoco Logistics’ NGLs acquisition and marketing activities of $66 million ; and

•

an increase of $1 million from Sunoco Logistics’ crude oil operations, primarily due to improved results from Sunoco Logistics’ crude oil pipelines of $116 million which benefited from the Permian Express 2 pipeline that commenced operations in third quarter 2015 and the Delaware Basin Extension and Permian Longview and Louisiana Extension pipelines that commenced operations in the third quarter 2016. Higher results from Sunoco Logistics’ crude oil terminals of $20 million , largely related to Sunoco Logistics’ Nederland facility, and improved contributions from joint venture interests of $9 million also contributed to the increase. These positive factors were largely offset by a decrease in operating results from Sunoco Logistics’ crude oil acquisition and marketing activities of $140 million , which includes transportation and storage fees related to Sunoco Logistics’ crude oil pipelines and terminal facilities, due to lower crude oil differentials and decreased volumes.

Retail Marketing



	Three Months Ended September 30,								Nine Months Ended September 30,
	2016		2015			Change			2016		2015			Change
Revenues	$	—	$	1,363		$	(1,363	)	$	—	$	11,705		$	(11,705	)
Cost of products sold	—		1,149			(1,149		)	—		10,519			(10,519		)
Gross margin	—		214			(214		)	—		1,186			(1,186		)
Unrealized (gains) losses on commodity risk management activities	—		(1		)	1			—		2			(2		)
Operating expenses, excluding non-cash compensation expense	—		(149		)	149			—		(701		)	701
Selling, general and administrative expenses, excluding non-cash compensation expense	—		(8		)	8			—		(99		)	99
Inventory valuation adjustments	—		4			(4		)	—		(60		)	60
Adjusted EBITDA related to unconsolidated affiliates	83		135			(52		)	208		136			72
Segment Adjusted EBITDA	$	83	$	195		$	(112	)	$	208	$	464		$	(256	)

Due to the transfer of the general partnership interest of Sunoco LP from ETP to ETE in 2015 and completion of the dropdown of remaining Retail Marketing interests from ETP to Sunoco LP in March 2016, the Partnership’s retail marketing segment has been deconsolidated, and the segment results now reflect an equity method investment in limited partnership units of Sunoco LP. As of September 30, 2016 , the Partnership owns 43.5 million Sunoco LP common units, representing 45.6% of Sunoco LP’s total outstanding common units.

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All Other



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			Change			2016			2015			Change
Revenues	$	956		$	976		$	(20	)	$	2,521		$	2,439		$	82
Cost of products sold	877			855			22			2,263			2,107			156
Gross margin	79			121			(42		)	258			332			(74		)
Unrealized (gains) losses on commodity risk management activities	1			(7		)	8			19			—			19
Operating expenses, excluding non-cash compensation expense	(20		)	(33		)	13			(57		)	(79		)	22
Selling, general and administrative expenses, excluding non-cash compensation expense	(14		)	(33		)	19			(60		)	(112		)	52
Adjusted EBITDA related to unconsolidated affiliates	(20		)	47			(67		)	1			103			(102		)
Other	23			23			—			71			71			—
Eliminations	(19		)	(25		)	6			(45		)	(49		)	4
Segment Adjusted EBITDA	$	30		$	93		$	(63	)	$	187		$	266		$	(79	)

Amounts reflected in our all other segment primarily include:


•	our natural gas marketing and compression operations;


•	a non-controlling interest in PES, comprising 33% of PES’ outstanding common units; and


•	our investment in Coal Handling, an entity that owns and operates end-user coal handling facilities.

For the three and nine months ended September 30, 2016 compared to the same periods last year, Segment Adjusted EBITDA related to our all other segment decreased primarily due to decreases of $65 million and $102 million , respectively, in Adjusted EBITDA related to our investment in PES. The three and nine months ended September 30, 2016 also reflected lower gross margin of $42 million and $74 million , respectively, and lower operating expenses of $13 million and $22 million , respectively, primarily resulting from a decrease in revenue-generating horsepower and lower project revenue from our compression operations and unfavorable results from our natural resources operations, as reflected above, as well as lower selling, general and administrative expenses resulting from a decrease in transaction-related expenses.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our ability to satisfy our obligations and pay distributions to our Unitholders will depend on our future performance, which will be subject to prevailing economic, financial, business and weather conditions, and other factors, many of which are beyond management’s control.

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We currently expect the following capital expenditures in 2016 to be within the following ranges:



	Growth				Maintenance
	Low		High		Low		High
Direct ⁽¹⁾ :
Intrastate transportation and storage ⁽²⁾	$	40	$	50	$	20	$	25
Interstate transportation and storage ⁽²⁾⁽³⁾	210		250		95		105
Midstream	1,225		1,275		100		110
Liquids transportation and services
NGL	875		900		20		25
Crude ⁽²⁾⁽³⁾	300		325		—		—
All other (including eliminations)	90		100		40		45
Total direct capital expenditures	$	2,740	$	2,900	$	275	$	310


⁽¹⁾	Direct capital expenditures exclude those funded by our publicly traded subsidiary.


⁽²⁾	Net of amounts forecasted to be financed at the asset level with non-recourse debt of approximately $1.17 billion .


⁽³⁾	Includes capital expenditures related to our proportionate ownership of the Bakken, Rover and Bayou Bridge pipeline projects.

We expect total direct growth capital expenditures of approximately $1.9 billion in 2017, net of amounts expected to be financed at the asset level.

The assets used in our natural gas and liquids operations, including pipelines, gathering systems and related facilities, are generally long-lived assets and do not require significant maintenance capital expenditures. Accordingly, we do not have any significant financial commitments for maintenance capital expenditures in our businesses. From time to time we experience increases in pipe costs due to a number of reasons, including but not limited to, delays from steel mills, limited selection of mills capable of producing large diameter pipe timely, higher steel prices and other factors beyond our control. However, we include these factors in our anticipated growth capital expenditures for each year.

We generally fund maintenance capital expenditures and distributions with cash flows from operating activities. We generally fund growth capital expenditures with proceeds of borrowings under credit facilities, long-term debt, the issuance of additional common units, dropdown proceeds or the monetization of non-core assets or a combination thereof.

Cash Flows

Our internally generated cash flows may change in the future due to a number of factors, some of which we cannot control. These include regulatory changes, the price for our products and services, the demand for such products and services, margin requirements resulting from significant changes in commodity prices, operational risks, the successful integration of our acquisitions, and other factors.

Operating Activities

Changes in cash flows from operating activities between periods primarily result from changes in earnings (as discussed in “Results of Operations” above), excluding the impacts of non-cash items and changes in operating assets and liabilities. Non-cash items include recurring non-cash expenses, such as depreciation, depletion and amortization expense and non-cash compensation expense. The increase in depreciation, depletion and amortization expense during the periods presented primarily resulted from construction and acquisitions of assets, while changes in non-cash unit-based compensation expense resulted from changes in the number of units granted and changes in the grant date fair value estimated for such grants. Cash flows from operating activities also differ from earnings as a result of non-cash charges that may not be recurring such as impairment charges and allowance for equity funds used during construction. The allowance for equity funds used during construction increases in periods when we have a significant amount of interstate pipeline construction in progress. Changes in operating assets and liabilities between periods result from factors such as the changes in the value of derivative assets and liabilities, timing of accounts receivable collection, payments on accounts payable, the timing of purchase and sales of inventories, and the timing of advances and deposits received from customers.

Nine months ended September 30, 2016 compared to nine months ended September 30, 2015 . Cash provided by operating activities during 2016 was $2.47 billion compared to $1.99 billion for 2015 and net income was $986 million and $1.50 billion for 2016 and 2015 , respectively. The difference between net income and cash provided by operating activities for the nine months

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ended September 30, 2016 primarily consisted of net changes in operating assets and liabilities of $172 million and non-cash items totaling $1.03 billion .

The non-cash activity in 2016 and 2015 consisted primarily of depreciation, depletion and amortization of $1.47 billion and $1.45 billion , respectively, non-cash compensation expense of $60 million and $59 million , respectively, and equity in earnings of unconsolidated affiliates of $260 million and $388 million , respectively. Non-cash activity in 2016 also included deferred income taxes of $154 million , impairment of investment in an unconsolidated affiliate of $308 million and inventory valuation adjustments of $143 million .

Cash paid for interest, net of interest capitalized, was $1.10 billion and $1.08 billion for the nine months ended September 30, 2016 and 2015 , respectively.

Capitalized interest was $148 million and $108 million for the nine months ended September 30, 2016 and 2015 , respectively.

Investing Activities

Cash flows from investing activities primarily consist of cash amounts paid in acquisitions, capital expenditures, cash distributions from our joint ventures, and cash proceeds from sales or contributions of assets or businesses. Changes in capital expenditures between periods primarily result from increases or decreases in our growth capital expenditures to fund our construction and expansion projects.

Nine months ended September 30, 2016 compared to nine months ended September 30, 2015 . Cash provided by investing activities during 2016 was $3.64 billion compared to cash used in investing activities of $5.15 billion for 2015 . Total capital expenditures (excluding the allowance for equity funds used during construction and net of contributions in aid of construction costs) for 2016 were $5.74 billion . This compares to total capital expenditures (excluding the allowance for equity funds used during construction and net of contributions in aid of construction costs) for 2015 of $6.50 billion . Additional detail related to our capital expenditures is provided in the table below. During 2016 , we received $2.20 billion in cash related to the contribution of our Sunoco, Inc. retail business to Sunoco LP. During 2015 , we received $980 million in cash related to the Bakken Pipeline Transaction and paid $604 million in cash for all other acquisitions.

The following is a summary of capital expenditures (net of contributions in aid of construction costs) for the nine months ended September 30, 2016 :



	Capital Expenditures Recorded During Period
	Growth		Maintenance		Total
Direct ⁽¹⁾ :
Intrastate transportation and storage	$	34	$	11	$	45
Interstate transportation and storage ⁽²⁾	138		55		193
Midstream	868		82		950
Liquids transportation and services ⁽²⁾	1,460		14		1,474
All other (including eliminations)	66		32		98
Total direct capital expenditures	2,566		194		2,760
Indirect ⁽¹⁾ :
Investment in Sunoco Logistics	1,237		40		1,277
Total capital expenditures	$	3,803	$	234	$	4,037


⁽¹⁾	Indirect capital expenditures comprise those funded by our publicly traded subsidiary; all other capital expenditures are reflected as direct capital expenditures.


⁽²⁾	Includes capital expenditures related to the Bakken, Rover and Bayou Bridge pipeline projects, which includes $268 million related to Sunoco Logistics’ proportionate ownership in the Bakken and Bayou Bridge pipeline projects.

Financing Activities

Changes in cash flows from financing activities between periods primarily result from changes in the levels of borrowings and equity issuances, which are primarily used to fund our acquisitions and growth capital expenditures. Distributions to partners increased between the periods as a result of increases in the number of Common Units outstanding.

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Nine months ended September 30, 2016 compared to nine months ended September 30, 2015 . Cash used in financing activities during 2016 was $1.03 billion compared to cashed provided by financing activities of $3.35 billion for 2015 . In 2016 and 2015 , we received net proceeds from Common Unit offerings of $794 million and $1.03 billion , respectively. In 2016 and 2015 , our subsidiaries received $1.31 billion and $1.27 billion , respectively, in net proceeds from the issuance of common units. During 2016 , we had a net increase in our debt level of $1.76 billion compared to a net increase of $3.19 billion for 2015 . We have paid distributions of $2.67 billion to our partners in 2016 compared to $2.25 billion in 2015 . We have also paid distributions of $334 million to noncontrolling interests in 2016 compared to $247 million in 2015 . In addition, we have received capital contributions of $187 million in cash from noncontrolling interests in 2016 compared to $583 million in 2015 .

Description of Indebtedness

Our outstanding consolidated indebtedness was as follows:



	September 30, 2016			December 31, 2015
ETP Senior Notes	$	19,439		$	19,439
Transwestern Senior Notes	782			782
Panhandle Senior Notes	1,085			1,085
Sunoco, Inc. Senior Notes	465			465
Sunoco Logistics Senior Notes	5,350			4,975
Bakken Term Note	1,100			—
Revolving credit facilities and commercial paper:
ETP $3.75 billion Revolving Credit Facility due November 2019 ⁽¹⁾	1,584			1,362
Sunoco Logistics $2.50 billion Revolving Credit Facility due March 2020 ⁽²⁾	622			562
Other long-term debt	32			32
Unamortized premiums, net of discounts and fair value adjustments	126			158
Deferred debt issuance costs	(187		)	(181		)
Total debt	30,398			28,679
Less: Current maturities of long-term debt	1,216			126
Long-term debt, less current maturities	$	29,182		$	28,553

⁽¹⁾ Includes $208 million of commercial paper outstanding at September 30, 2016 .

⁽²⁾ Includes $140 million of commercial paper product outstanding at September 30, 2016 .

Credit Facilities and Commercial Paper

ETP Credit Facility

Sunoco Logistics Credit Facilities

Sunoco Logistics Senior Notes

Sunoco Logistics had $175 million of 6.125% senior notes which matured and were repaid in May 2016, using borrowings under the $2.50 billion Sunoco Logistics Credit Facility.

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Bakken Financing

Covenants Related to Our Credit Agreements

We were in compliance with all requirements, tests, limitations, and covenants related to our credit agreements as of September 30, 2016 .

CASH DISTRIBUTIONS

Cash Distributions Paid by ETP

We expect to use substantially all of our cash provided by operating and financing activities from the Operating Companies to provide distributions to our Unitholders. Under our Partnership Agreement, we will distribute to our partners within 45 days after the end of each calendar quarter, an amount equal to all of our Available Cash (as defined in our Partnership Agreement) for such quarter. Available Cash generally means, with respect to any quarter of the Partnership, all cash on hand at the end of such quarter less the amount of cash reserves established by the General Partner in its reasonable discretion that is necessary or appropriate to provide for future cash requirements. Our commitment to our Unitholders is to distribute the increase in our cash flow while maintaining prudent reserves for our operations.

Following are distributions declared and/or paid by us subsequent to December 31, 2015 :



Quarter Ended	Record Date	Payment Date	Rate
December 31, 2015	February 8, 2016	February 16, 2016	$	1.0550
March 31, 2016	May 6, 2016	May 16, 2016	1.0550
June 30, 2016	August 8, 2016	August 15, 2016	1.0550
September 30, 2016	November 7, 2016	November 14, 2016	1.0550

The total amounts of distributions declared for the periods presented (all from Available Cash from our operating surplus and are shown in the period with respect to which they relate):



	Nine Months Ended September 30,
	2016			2015
Common Units held by public ⁽¹⁾	$	1,607		$	1,458
Common Units held by ETE	8			51
Class H Units held by ETE	263			186
General Partner interest held by ETE	24			23
Incentive distributions held by ETE	1,012			937
IDR relinquishments net of Class I Unit distributions	(271		)	(83		)
Total distributions declared to the partners of ETP	$	2,643		$	2,572


⁽¹⁾	Reflects the impact from Common Units issued in the Regency Merger.

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	Total Year
2016 (remainder)	$	138
2017	626
2018	138
2019	128
Each year beyond 2019	33

Cash Distributions Paid by Sunoco Logistics

Sunoco Logistics is required by its partnership agreement to distribute all cash on hand at the end of each quarter, less appropriate reserves determined by its general partner.

Following are distributions declared and/or paid by Sunoco Logistics subsequent to December 31, 2015 :



Quarter Ended	Record Date	Payment Date	Rate
December 31, 2015	February 8, 2016	February 12, 2016	$	0.4790
March 31, 2016	May 9, 2016	May 13, 2016	0.4890
June 30, 2016	August 8, 2016	August 12, 2016	0.5000
September 30, 2016	November 9, 2016	November 14, 2016	0.5100

The total amounts of Sunoco Logistics distributions declared for the periods presented were as follows (all from Available Cash from Sunoco Logistics’ operating surplus and are shown in the period with respect to which they relate):



	Nine Months Ended September 30,
	2016			2015
Limited Partners:
Common units held by public	$	353		$	245
Common units held by ETP	100			88
General Partner interest held by ETP	11			9
Incentive distributions held by ETP	289			198
IDR reduction	(8		)	—
Total distributions declared	$	745		$	540

Cash Distributions Paid by PennTex

PennTex is required by its partnership agreement to distribute a minimum quarterly distribution of $0.2750 per unit at the end of each quarter. For the three months ended September 30, 2016 , PennTex declared a quarterly distribution of $0.2950 per unit to be paid on November 14, 2016 to unitholders of record as of November 7, 2016.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information contained in Item 3 updates, and should be read in conjunction with, information set forth in Part II, Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2015 , in addition to the accompanying notes and management’s discussion and analysis of financial condition and results of operations presented in Items 1 and 2 of this Quarterly Report on Form 10-Q. Our quantitative and qualitative disclosures about market risk are consistent with those discussed for the year ended December 31, 2015 . Since December 31, 2015 , there have been no material changes to our primary market risk exposures or how those exposures are managed.

Commodity Price Risk

The table below summarizes our commodity-related financial derivative instruments and fair values, including derivatives related to our consolidated subsidiaries, as well as the effect of an assumed hypothetical 10% change in the underlying price of the commodity. Notional volumes are presented in MMBtu for natural gas, thousand megawatt for power, barrels for natural gas liquids, crude and refined products and bushels for corn. Dollar amounts are presented in millions.



	September 30, 2016							December 31, 2015
	Notional Volume		Fair Value Asset (Liability)			Effect of Hypothetical 10% Change		Notional Volume		Fair Value Asset (Liability)			Effect of Hypothetical 10% Change
Mark-to-Market Derivatives
(Trading)
Natural Gas (MMBtu):
Fixed Swaps/Futures	1,262,500		$	—		$	—	(602,500	)	$	(1	)	$	—
Basis Swaps IFERC/NYMEX ⁽¹⁾	60,102,500		—			—		(31,240,000	)	(1		)	—
Power (Megawatt):
Forwards	419,824		2			1		357,092		—			2
Futures	99,247		—			—		(109,791	)	2			—
Options – Puts	(536,400	)	1			—		260,534		—			—
Options – Calls	1,080,400		(2		)	2		1,300,647		—			3
Crude (Bbls):
Futures	(656,000	)	—			5		(591,000	)	4			3
(Non-Trading)
Natural Gas (MMBtu):
Basis Swaps IFERC/NYMEX	4,762,500		1			—		(6,522,500	)	—			—
Swing Swaps IFERC	13,072,500		—			2		71,340,000		(1		)	—
Fixed Swaps/Futures	(35,962,500	)	—			11		(14,380,000	)	(1		)	5
Forward Physical Contracts	(6,834,328	)	1			2		21,922,484		4			5
Natural Gas Liquid (Bbls) – Forwards/Swaps	(13,519,200	)	(29		)	42		(8,146,800	)	10			13
Refined Products (Bbls) – Futures	(1,970,000	)	(9		)	20		(993,000	)	9			5
Corn (Bushels) – Futures	—		—			—		1,185,000		—			1
Fair Value Hedging Derivatives
(Non-Trading)
Natural Gas (MMBtu):
Basis Swaps IFERC/NYMEX	(30,620,000	)	(1		)	—		(37,555,000	)	—			—
Fixed Swaps/Futures	(30,620,000	)	(12		)	10		(37,555,000	)	73			9


⁽¹⁾	Includes aggregate amounts for open positions related to Houston Ship Channel, Waha Hub, NGPL TexOk, West Louisiana Zone and Henry Hub locations.

The fair values of the commodity-related financial positions have been determined using independent third party prices, readily available market information and appropriate valuation techniques. Non-trading positions offset physical exposures to the cash

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market; none of these offsetting physical exposures are included in the above tables. Price-risk sensitivities were calculated by assuming a theoretical 10% change (increase or decrease) in price regardless of term or historical relationships between the contractual price of the instruments and the underlying commodity price. Results are presented in absolute terms and represent a potential gain or loss in net income or in other comprehensive income. In the event of an actual 10% change in prompt month natural gas prices, the fair value of our total derivative portfolio may not change by 10% due to factors such as when the financial instrument settles and the location to which the financial instrument is tied (i.e., basis swaps) and the relationship between prompt month and forward months.

Interest Rate Risk

As of September 30, 2016 , we had $3.86 billion of floating rate debt outstanding. A hypothetical change of 100 basis points would result in a maximum potential change to interest expense of $39 million annually; however, our actual change in interest expense may be less in a given period due to interest rate floors included in our variable rate debt instruments. We manage a portion of our interest rate exposure by utilizing interest rate swaps, including forward-starting interest rate swaps to lock-in the rate on a portion of anticipated debt issuances.

The following table summarizes our interest rate swaps outstanding (dollars in millions), none of which are designated as hedges for accounting purposes:



Term	Type ⁽¹⁾	Notional Amount Outstanding
Term	Type ⁽¹⁾	September 30, 2016		December 31, 2015
July 2016 ⁽²⁾⁽⁴⁾	Forward-starting to pay a fixed rate of 3.80% and receive a floating rate	$	—	$	200
July 2017 ⁽³⁾⁽⁴⁾	Forward-starting to pay a fixed rate of 3.90% and receive a floating rate	500		300
July 2018 ⁽³⁾	Forward-starting to pay a fixed rate of 4.00% and receive a floating rate	200		200
December 2018	Pay a floating rate based on a 3-month LIBOR and receive a fixed rate of 1.53%	1,200		1,200
March 2019	Pay a floating rate based on a 3-month LIBOR and receive a fixed rate of 1.42%	300		300
July 2019 ⁽³⁾	Forward-starting to pay a fixed rate of 3.25% and receive a floating rate	200		200


⁽¹⁾	Floating rates are based on 3-month LIBOR.


⁽²⁾	Represents the effective date. These forward-starting swaps have terms of 10 and 30 years with a mandatory termination date the same as the effective date.


⁽³⁾	Represents the effective date. These forward-starting swaps have terms of 30 years with a mandatory termination date the same as the effective date.


⁽⁴⁾	ETP previously had outstanding forward starting interest rate swaps, which were scheduled to expire in July 2016, with a total notional value of $200 million . In June 2016, ETP extended the expiration of those swaps to July 2017.

A hypothetical change of 100 basis points in interest rates for these interest rate swaps would result in a net change in the fair value of interest rate derivatives and earnings (recognized in gains and losses on interest rate derivatives) of $253 million as of September 30, 2016 . For the $1.50 billion of interest rate swaps whereby we pay a floating rate and receive a fixed rate, a hypothetical change of 100 basis points in interest rates would result in a net change in annual cash flows of $43 million . For the forward-starting interest rate swaps, a hypothetical change of 100 basis points in interest rates would not affect cash flows until the swaps are settled.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that information required to be disclosed by us, including our consolidated entities, in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

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Under the supervision and with the participation of senior management, including the Chief Executive Officer (“Principal Executive Officer”) and the Chief Financial Officer (“Principal Financial Officer”) of our General Partner, we evaluated our disclosure controls and procedures, as such term is defined under Rule 13a–15(e) promulgated under the Exchange Act. Based on this evaluation, the Principal Executive Officer and the Principal Financial Officer of our General Partner concluded that our disclosure controls and procedures were effective as of September 30, 2016 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to management, including the Principal Executive Officer and Principal Financial Officer of our General Partner, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting (as defined in Rule 13(a)–15(f) or Rule 15d–15(f) of the Exchange Act) during the three months ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For information regarding legal proceedings, see our Form 10-K for the year ended December 31, 2015 and Note 10 – Regulatory Matters, Commitments, Contingencies and Environmental Liabilities of the Notes to Consolidated Financial Statements of Energy Transfer Partners, L.P. and Subsidiaries included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 .

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors described in Part I, Item 1A in our Annual Report on Form 10-K for our previous fiscal year ended December 31, 2015 . The following risk factor, which was previously included in our Form 10-K, has been included herein along with additional quantitative information with respect to the Partnership’s revenues, in order to supplement the disclosures previously provided in the Form 10-K.

The profitability of certain activities in our natural gas gathering, processing, transportation and storage operations are largely dependent upon natural gas commodity prices, price spreads between two or more physical locations and market demand for natural gas and NGLs.

For a portion of the natural gas gathered on our systems, we purchase natural gas from producers at the wellhead and then gather and deliver the natural gas to pipelines where we typically resell the natural gas under various arrangements, including sales at index prices. Generally, the gross margins we realize under these arrangements decrease in periods of low natural gas prices.

We also enter into percent-of-proceeds arrangements, keep-whole arrangements, and processing fee agreements pursuant to which we agree to gather and process natural gas received from the producers.

Under percent-of-proceeds arrangements, we generally sell the residue gas and NGLs at market prices and remit to the producers an agreed upon percentage of the proceeds based on an index price. In other cases, instead of remitting cash payments to the producer, we deliver an agreed upon percentage of the residue gas and NGL volumes to the producer and sell the volumes we keep to third parties at market prices. Under these arrangements, our revenues and gross margins decline when natural gas prices and NGL prices decrease. Accordingly, a decrease in the price of natural gas or NGLs could have an adverse effect on our revenues and results of operations.

Under keep-whole arrangements, we generally sell the NGLs produced from our gathering and processing operations at market prices. Because the extraction of the NGLs from the natural gas during processing reduces the Btu content of the natural gas, we must either purchase natural gas at market prices for return to producers or make a cash payment to producers equal to the value of this natural gas. Under these arrangements, our gross margins generally decrease when the price of natural gas increases relative to the price of NGLs.

When we process the gas for a fee under processing fee agreements, we may guarantee recoveries to the producer. If recoveries are less than those guaranteed to the producer, we may suffer a loss by having to supply liquids or its cash equivalent to keep the producer whole.

We also receive fees and retain gas in kind from our natural gas transportation and storage customers. Our fuel retention fees and the value of gas that we retain in kind are directly affected by changes in natural gas prices. Decreases in natural gas prices tend to decrease our fuel retention fees and the value of retained gas.

In addition, we receive revenue from our off-gas processing and fractionating system in south Louisiana primarily through customer agreements that are a combination of keep-whole and percent-of-proceeds arrangements, as well as from transportation and fractionation fees. Consequently, a large portion of our off-gas processing and fractionation revenue is exposed to risks due to fluctuations in commodity prices. In addition, a decline in NGL prices could cause a decrease in demand for our off-gas processing and fractionation services and could have an adverse effect on our results of operations.

For our midstream segment, we generally analyze gross margin based on fee-based margin (which includes revenues from processing fee arrangements) and non fee-based margin (which includes gross margin earned on percent-of-proceeds and keep-whole arrangements). For the nine months ended September 30, 2016 and 2015 , gross margin from our midstream segment totaled $1.35 billion of which fee-based revenues constituted 87% and 88% , respectively, and non fee-based margin constituted 13% and 12% , respectively. For the years ended December 31, 2015 and 2014, gross margin from our midstream segment totaled $1.81 billion and $1.93 billion, respectively, of which fee-based revenues constituted 86% and 66%, respectively, and non fee-based margin constituted 14% and 34%, respectively. The amount of gross margin earned by our midstream segment from fee-based and non fee-based arrangements (individually and as a percentage of total revenues) will be impacted by the volumes associated with both types of arrangements, as well as commodity prices; therefore, the dollar amounts and the relative magnitude of gross

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margin from fee-based and non fee-based arrangements in future periods may be significantly different from results reported in previous periods.

Protests and legal actions against our Dakota Access pipeline project have caused construction delays and may further delay the completion of the pipeline project.

During the summer of 2016, individuals affiliated with, or sympathetic to, the Standing Rock Sioux Native American tribe (the “SRST”) began gathering near a construction site on our Dakota Access pipeline project in North Dakota to protest the development of the pipeline project. Some of the protesters eventually trespassed on to the construction site, tampered with equipment, and disrupted construction activity at the site. At this time, we are working with the various authorities to mitigate this unlawful protest. Dakota Access has the necessary permits and approvals to perform all work on the pipeline project, other than a small area under dispute as described below. In response to the protests, Dakota Access filed a lawsuit in federal court in North Dakota to restrain protestors from disrupting construction and also requested a temporary restraining order (“TRO”) against the Chairman of the SRST and the protestors. The U.S. District Court granted Dakota Access’s request for a TRO, and the defendants filed a motion to dismiss the case and dissolve the TRO. The Court later granted the defendants’ motions to dissolve the TRO. Dakota Access filed a response to the defendant’s motion to dismiss, and the Court has yet to rule. At this time, we cannot determine how long the protest will continue, how the legal action will be resolved, or the impact both may have on construction time. Additional protests or legal actions may arise in connection with our Dakota Access project or other projects. Trespass on to construction sites or our physical facilities, or other disruptions, could result in further damage to our assets, safety incidents, potential liability or project delays.

In July 2016, the U.S. Army Corps of Engineers (“USACE”) issued permits to Dakota Access consistent with environmental and historic preservation statutes for the pipeline to make two crossings of the Missouri River in North Dakota, including a crossing of the Missouri River at Lake Oahe. The USACE has also issued an easement to allow the crossing of land owned by the USACE adjacent to the Missouri River at one location, but has not issued an easement to allow the crossing of land owned by the USACE adjacent to Lake Oahe. The SRST filed a lawsuit in the U.S. District Court for the District of Columbia against the USACE challenging the legality of the permits issued for the construction of the Dakota Access pipeline across those waterways and claiming violations of the National Historic Preservation Act (“NHPA”). The SRST also sought a preliminary injunction to rescind the USACE permits while the case is pending. Dakota Access’ moved to intervene in the case and that motion was granted by the Court. The SRST has also sought an emergency TRO to stop construction on the pipeline project. After a hearing on the TRO, the parties agreed to voluntarily stop construction in the relevant geographic area until the Court ruled on the preliminary injunction. Three days later, on September 9, 2016, the Court denied SRST’s motion for a preliminary injunction. After that decision, the Department of the Army, the Department of Justice, and the Department of the Interior released a joint statement stating that the USACE would not grant the easement for the land adjacent to Lake Oahe until the federal departments completed a review of the SRST’s claims in its lawsuit with respect to the USACE’s compliance with certain federal statutes in connection with its activities related to the granting of the permits. The SRST appealed the denial of the preliminary injunction to the U.S. Court of Appeals for the D.C. Circuit and filed an emergency motion for an injunction pending the appeal to the U.S. District Court. The U.S. District Court denied SRST’s emergency motion for an injunction pending the appeal. The SRST filed an amended complaint and added claims based on treaties between the tribes and the United States and statues governing the use of government property. The appeal of the U.S. District Court’s September 9th denial of the SRST’s preliminary injunction is still pending.

In addition, the Cheyenne River Sioux and Yankton Sioux tribes have filed related lawsuits in an effort to prevent construction of the Dakota Access pipeline project.

While we believe that the review process by the federal departments has been completed and that the easement for the land adjacent to Lake Oahe will be granted in a timely manner, we cannot assure this outcome. Any significant delay in receiving this easement will delay the receipt of revenue from this project. In addition, any action or inaction by the federal departments may increase the cost of construction of the pipeline. We cannot determine when or how these lawsuits will be resolved or the impact they may have on the Dakota Access project.

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ITEM 6. EXHIBITS

The exhibits listed below are filed or furnished, as indicated, as part of this report:



Exhibit Number		Description
2.1		Contribution Agreement, dated October 24, 2016 by and among Energy Transfer Partners, L.P. and NGP X US Holdings, LP, PennTex Midstream Partners, LLC, MRD Midstream LLC, WHR Midstream LLC and certain individual investors and managers named therein (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K filed October 25, 2016).
2.2*		Membership Interest Purchase Agreement, dated as of August 2, 2016, by and between Bakken Holdings Company LLC and MarEn Bakken Company LLC.
3.1		Amendment No. 13 to the Second Amended and Restated Agreement of Limited Partnership of Energy Transfer Partners, L.P., dated July 27, 2016 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed August 2, 2016).
10.1		Form of Commercial Paper Dealer Agreement between Energy Transfer Partners, L.P., as Issuer, and the Dealer party thereto (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K filed August 22, 2016).
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document



*		Filed herewith.
**		Furnished herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		ENERGY TRANSFER PARTNERS, L.P.

		By:	Energy Transfer Partners GP, L.P.,
			its General Partner

		By:	Energy Transfer Partners, L.L.C.,
			its General Partner

Date:	November 9, 2016	By:	/s/ A. Troy Sturrock
			A. Troy Sturrock
			Senior Vice President, Controller and Principal Accounting Officer (duly authorized to sign on behalf of the registrant)

MEMBERSHIP INTEREST PURCHASE AGREEMENT

dated as of

August 2, 2016

by and between

BAKKEN HOLDINGS COMPANY LLC

(as Seller)

and

MAREN BAKKEN COMPANY LLC

(as Buyer)

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		Page
ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION		2
Section 1.1	Definitions	2
Section 1.2	Rules of Construction	2

ARTICLE II TRANSFER OF TRANSFERRED INTERESTS		2
Section 2.1	Transfer of Transferred Interests	2

ARTICLE III CONSIDERATION		3
Section 3.1	Consideration	3
Section 3.2	Guaranties	3

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER		3
Section 4.1	Organization of Seller	3
Section 4.2	Authorization; Enforceability	3
Section 4.3	No Conflict	3
Section 4.4	Consents; Transfer Restrictions	4
Section 4.5	Title to Transferred Interests	4
Section 4.6	Brokers’ Fees	4
Section 4.7	Litigation	4
Section 4.8	No Bankruptcy	5

ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY AND ITS SUBSIDIARIES		5
Section 5.1	Organization	5
Section 5.2	No Conflict	5
Section 5.3	Consents; Transfer Restrictions	6
Section 5.4	Contracts.	6
Section 5.5	Litigation	7
Section 5.6	Taxes	7
Section 5.7	Compliance with Laws	8
Section 5.8	Environmental Matters	9
Section 5.9	Membership Interests	10
Section 5.10	Title Matters; Real Property Interests	11
Section 5.11	Balance Sheet	11
Section 5.12	Indebtedness	12
Section 5.13	Credit Support	12
Section 5.14	Employees; Benefit Plan Matters	12
Section 5.15	Insurance	12
Section 5.16	Brokers Fees	12
Section 5.17	No Bankruptcy	12



ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER		12
Section 6.1	Organization of Buyer	12
Section 6.2	Authorization; Enforceability	12
Section 6.3	No Conflict; Consents	13
Section 6.4	Consents and Approvals	13
Section 6.5	Litigation	13
Section 6.6	Brokers’ Fees	14
Section 6.7	Financial Ability	14
Section 6.8	Regulatory	14
Section 6.9	Independent Evaluation	14
Section 6.10	Accredited Investor	14

ARTICLE VII COVENANTS		15
Section 7.1	Conduct of Business, Operation of Assets	15
Section 7.2	Access and Information	16
Section 7.3	Regulatory Filings	17
Section 7.4	Consents	17
Section 7.5	Amendment of Schedules	18
Section 7.6	Further Assurances	18
Section 7.7	Exclusivity	18
Section 7.8	Senior Secured Credit Facility	19

ARTICLE VIII CONDITIONS TO CLOSING		19
Section 8.1	Buyer’s Conditions to Closing	19
Section 8.2	Conditions to the Obligations of Seller	20

ARTICLE IX CLOSING		21
Section 9.1	Closing	21
Section 9.2	Seller Deliverables	21
Section 9.3	Buyer Deliverables	21

ARTICLE X INDEMNIFICATION		22
Section 10.1	Survival	22
Section 10.2	Indemnification Provisions for Benefit of Buyer	22
Section 10.3	Indemnification Provisions for Benefit of Seller	23
Section 10.4	Limitation on Liability	23
Section 10.5	Procedures	24
Section 10.6	Express Negligence	25
Section 10.7	Waiver of Right to Rescission	26
Section 10.8	Exclusive Remedy	26
Section 10.9	Non-Compensatory Damages	26
Section 10.10	Tax Treatment of Payments	27



ARTICLE XI TERMINATION		27
Section 11.1	Termination	27
Section 11.2	Effect of Termination	28
Section 11.3	Return of Documentation and Confidentiality	28

ARTICLE XII DISCLAIMERS		28
Section 12.1	Disclaimer - Representations and Warranties	28
Section 12.2	Disclaimer - Statements and Information	29

ARTICLE XIII TAX MATTERS		30
Section 13.1	Liability for Transfer Taxes	30
Section 13.2	Company Tax Returns	30
Section 13.3	Cooperation on Tax Matters	31
Section 13.4	Straddle Period	31
Section 13.5	Tax Classification Elections	31
Section 13.6	754 Election	31
Section 13.7	Intended Tax Treatment	31
Section 13.8	Allocation of Purchase Price	32

ARTICLE XIV MISCELLANEOUS		32
Section 14.1	Notices	32
Section 14.2	Succession and Assignment	33
Section 14.3	Rights of Third Parties	33
Section 14.4	Expenses	34
Section 14.5	Counterparts	34
Section 14.6	Entire Agreement	34
Section 14.7	No Partnership	34
Section 14.8	Amendments	34
Section 14.9	Publicity	34
Section 14.10	Non-Waiver	35
Section 14.11	Severability	35
Section 14.12	Governing Law; Jurisdiction	35
Section 14.13	Schedules	36

iii

LIST OF APPENDIXES, EXHIBITS AND SCHEDULES

Appendixes


Appendix I	Definitions

Exhibits


Exhibit A	Form of Assignment


Exhibit B	Form of Company Agreement


Exhibit C	Form of Seller Parent Guaranties


Exhibit D	Form of Buyer Parent Guaranties

Schedules


Schedule 1.1(a)	Seller Persons with Knowledge


Schedule 1.1(b)	Buyer Persons with Knowledge


Schedule 1.1(c)	Certain Permitted Liens


Schedule 4.3	Seller’s No Conflicts


Schedule 5.1(d)	Managers, Directors and Officers


Schedule 5.2	No Conflicts


Schedule 5.3	Company Consents and Approvals


Schedule 5.4(a)	Material Contracts


Schedule 5.5	Litigation


Schedule 5.6	Taxes


Schedule 5.7(a)	Compliance with Laws


Schedule 5.7(b)	Material Permits


Schedule 5.7(c)	Certain Material Permits


Schedule 5.8(b)	Environmental Matters


Schedule 5.8(c)	Material Environmental Permits


Schedule 5.9	Membership Interests


Schedule 5.11(a)	Balance Sheet


Schedule 5.12	Indebtedness


Schedule 5.13	Credit Support


Schedule 5.15(a)	Insurance


Schedule 5.15(b)	Certain Insurance Claims


Schedule 6.3	Buyer’s No Conflicts

MEMBERSHIP INTEREST PURCHASE AGREEMENT

This Membership Interest Purchase Agreement (this “ Agreement ”), dated as of August 2, 2016 (the “ Execution Date ”), is entered into by and between Bakken Holdings Company LLC, a Delaware limited liability company (“ Seller ”), and MarEn Bakken Company LLC, a Delaware limited liability company (“ Buyer ”). Seller and Buyer are sometimes referred to collectively herein as the “ Parties ” and each individually a “ Party .”

RECITALS

WHEREAS, Seller is the owner of 100% of the issued and outstanding membership interests (the “ Membership Interests ”) of Bakken Pipeline Investments LLC, a Delaware limited liability company (the “ Company ”);

WHEREAS, the Company owns (a) 100% of the issued and outstanding membership interests of Dakota Access Holdings LLC, a Delaware limited liability company (“ Dakota Access Holdings ”), and (b) 100% of the issued and outstanding membership interests of ETCO Holdings LLC, a Delaware limited liability company (“ ETCO Holdings ” and, together with Dakota Access Holdings, the “ Holding Companies ,” and each individually a “ Holding Company ”);

WHEREAS, (a) Dakota Access Holdings owns 75% of the issued and outstanding membership interests of Dakota Access, LLC, a Delaware limited liability company (“ Dakota Access ”), (b) ETCO Holdings owns 75% of the issued and outstanding membership interests of Energy Transfer Crude Oil Company LLC, a Delaware limited liability company (“ ETCO ” and, together with Dakota Access, the “ Development Companies ,” and each individually a “ Development Company ”), (c) Dakota Access owns 100% of the issued and outstanding membership interests of Dakota Access Truck Terminals, LLC, a Delaware limited liability company (“ Dakota Truck ”) and (d) ETCO owns 100% of the issued and outstanding membership interests of Eastern Gulf Crude Access LLC, a Delaware limited liability company (“ EGCA ”) (the Development Companies, the Holding Companies, Dakota Truck and EGCA are sometimes referred to collectively herein as the “ Subsidiaries ” and each individually a “ Subsidiary ”); and

WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, at the Closing, 49% of the Membership Interests (the “ Transferred Interests ”), subject to the terms and conditions described in this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION

Section 1.1 Definitions . Capitalized terms used in this Agreement but not otherwise defined shall have the meanings given to such terms in Appendix I .

Section 1.2 Rules of Construction .

(a) All Article, Section, Appendix, Schedule and Exhibit references used in this Agreement are to Articles and Sections of, and Appendixes, Schedules and Exhibits to, this Agreement unless otherwise specified. The Appendix, Schedules and Exhibits attached to this Agreement constitute a part of this Agreement. The words “hereof,” “hereto,” “hereby,” “herein,” “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular Section or Article in which such words appear. The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

(b) If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb). Unless the context of this Agreement clearly requires otherwise, terms and titles (including terms defined herein) in the singular have the corresponding meanings in the plural (and vice versa) and words importing the masculine gender shall include the feminine and neutral genders and vice versa. The terms “include,” “includes” or “including” shall mean “including without limitation.” All references to currency or to “$” herein shall be to, and all payments required hereunder shall be paid in, Dollars. All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP. References to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified (including any waiver or consent) and in effect from time to time in accordance with the terms thereof. Time is of the essence in this Agreement.

(c) Except as expressly provided otherwise in this Agreement, references to any Law or agreement means such Law or agreement as it may be amended from time to time.

(d) The Parties acknowledge that each Party and its attorneys have reviewed this Agreement and that any rule of construction to the effect that any ambiguities are to be resolved against the drafting Party, or any similar rule operating against the drafter of an agreement, shall not be applicable to the construction or interpretation of this Agreement.

ARTICLE II
TRANSFER OF TRANSFERRED INTERESTS

Section 2.1 Transfer of Transferred Interests . Upon the terms and subject to the conditions set forth herein, at the Closing, Seller shall sell, assign, transfer and convey the Transferred Interests to Buyer, and Buyer will purchase, acquire and accept from Seller the Transferred Interests.

ARTICLE III
CONSIDERATION

Section 3.1 Consideration . The consideration for the sale and purchase of the Transferred Interests contemplated by Section 2.1 , shall be an amount equal to TWO BILLION AND NO/100 ($2,000,000,000) (the “ Purchase Price ”), paid to Seller in cash at Closing by wire transfer of immediately available funds to an account designated by Seller.

Section 3.2 Guaranties . On the Execution Date, (a) Buyer shall deliver to Seller a guaranty from (i) Enbridge Energy Partners, L.P., in favor of Seller, of an undivided seventy-five percent (75%) of Buyer’s obligations under this Agreement and (ii) Marathon Petroleum Corporation, in favor of Seller, of an undivided twenty-five percent (25%) of Buyer’s obligations under this Agreement; and (b) Seller shall deliver to Buyer a guaranty from Energy Transfer Partners, L.P., in favor of Buyer, of Seller’s obligations under this Agreement.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as of the Execution Date as follows:

Section 4.1 Organization of Seller . Seller is duly formed, validly existing and in good standing under the Laws of the state of its formation.

Section 4.2 Authorization; Enforceability . Seller has all requisite power and authority to execute and deliver this Agreement and each Transaction Document to which Seller is a party, to sell the Transferred Interests and to perform all other obligations to be performed by Seller hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and each Transaction Document to which Seller is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized and approved by all action on the part of Seller. This Agreement constitutes, and each Transaction Document to which Seller is a party, when duly and validly executed and delivered by Seller will constitute (assuming due authorization, execution and delivery by Buyer and any other Persons party thereto that is not an Affiliate of Seller), legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity (regardless of whether such enforceability is considered in a Proceeding in equity or at Law).

Section 4.3 No Conflict . Except as set forth on Schedule 4.3 , Seller’s execution, delivery and performance of this Agreement and the Transaction Documents to which Seller is a party and the consummation of the transactions contemplated hereby and thereby by Seller shall not:

(a) violate or result in a breach of, or conflict with or require the consent of any Person under, any of the terms, conditions or provisions of the Organizational Documents of Seller;

(b) materially violate or result in a material breach of any provision of any Laws applicable to Seller; or

(c) conflict with, result in a violation or breach of, constitute a default under or an event that, with or without notice or lapse of time, or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any Contract to which Seller is a party or by which Seller or any of its assets is bound, except for any such violations or defaults which would not reasonably be expected to result in a material impairment of Seller’s ability to perform its obligations hereunder and under the Transaction Documents.

Section 4.4 Consents; Transfer Restrictions . Except (a) for Customary Post-Closing Consents and (b) for immaterial Consents, no Consent is required to be obtained by Seller in connection with Seller’s execution, delivery or performance of this Agreement and the Transaction Documents to which Seller is a party, the transfer of the Transferred Interests to Buyer or the consummation of the transactions contemplated by this Agreement or any Transaction Document by Seller.

Section 4.5 Title to Transferred Interests . The Transferred Interests, (a) are owned beneficially and of record by Seller and Seller has good and valid title thereto, are free and clear of all Liens and are not subject to any agreements or understandings among any Persons with respect to the voting or transfer thereof other than as set forth in the LLC Agreement and this Agreement and (b) are not subject to any outstanding subscriptions, options, convertible securities, warrants, calls or other securities granting rights to purchase or otherwise acquire any of such Transferred Interests or, except for this Agreement, any commitments or agreements of any character obligating Seller to transfer any of such Transferred Interests. The Transferred Interests are duly authorized, validly issued, fully paid and, subject to the Laws of the State of Delaware, non-assessable, and were not issued in violation of any applicable Laws, the Organizational Documents of Seller or the Company, or any purchase option, call option, right of first refusal, preemptive right or other similar right.

Section 4.6 Brokers’ Fees . Seller has no liability or obligation to pay any fees or commissions to any broker, finder, agent or other Person with respect to the transactions contemplated hereby or the Transactions for which the Company, the Subsidiaries, Buyer or its Affiliates will become liable or obligated.

Section 4.7 Litigation . Except as set forth on Schedule 5.5 , there is no Proceeding (filed by any Person other than Buyer or any of its Affiliates) pending or, to Seller’s Knowledge, threatened against Seller by or before any Governmental Authority that would reasonably be expected to result in a material adverse effect on Seller’s ability to consummate the transactions contemplated by this Agreement or any of the Transactions

or which seeks an Order restraining, enjoining or otherwise prohibiting or making illegal any of the Transactions or the transactions contemplated hereby.

Section 4.8 No Bankruptcy . There are no bankruptcy Proceedings pending against, being contemplated by or, to the Knowledge of Seller, threatened against or affecting Seller.

ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY AND ITS SUBSIDIARIES

Seller hereby represents and warrants to Buyer as of the Execution Date as follows:

Section 5.1 Organization .

(a) The Company is a limited liability company duly formed and validly existing under the Laws of the State of Delaware. The Company has all requisite power and authority to own and operate its property and to carry on its business as presently conducted by it. The Company is duly licensed, qualified or otherwise authorized to conduct business and is in good standing under the Laws of each jurisdiction in which it carries on business or owns assets and such qualification is required by Law, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect.

(b) Each Subsidiary is a limited liability company duly formed and validly existing under the Laws of the State of Delaware. Each Subsidiary has all requisite power and authority to own and operate its property and to carry on its business as presently conducted by it. Each Subsidiary is duly licensed, qualified or otherwise authorized to conduct business and is in good standing under the Laws of each jurisdiction in which it carries on business or owns assets and such qualification is required by Law, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect.

(c) True and complete copies of the Organizational Documents of the Company and each of the Subsidiaries and all amendments thereto have been furnished to Buyer. There are no uncured or continuing violations, breaches of, or defaults under any provisions of the Organizational Documents of the Company or any Subsidiary (other than the Development Companies). There are no uncured or continuing violations, breaches of, or defaults under any provisions of either Development Company Agreement by the Holding Company party thereto or, to Seller’s Knowledge, the other party thereto.

(d) Schedule 5.1(d) sets forth a true and complete listing of each manager, director and officer of the Company and each of the Subsidiaries.

Section 5.2 No Conflict . Except as set forth on Schedule 5.2 , Seller’s execution, delivery and performance of this Agreement and Seller’s execution, delivery and performance of the Transaction Documents to which Seller is a party and the consummation of the transactions contemplated hereby and thereby by Seller shall not:

(a) violate or result in a breach of, or conflict with or require the consent (which has not previously been obtained) of any Person (other than Seller) under, any of the terms, conditions or provisions of the Organizational Documents of the Company or any Subsidiary;

(b) materially violate or result in a material breach of any provision of any Laws applicable to the Company or the Subsidiaries;

(c) conflict with, result in a material violation or material breach of, constitute a material default under or constitute an event that with or without notice or lapse of time, or both, would constitute a material default under, accelerate or permit the acceleration, termination, modification or cancellation of the performance required by, any Material Contract, Real Property Interest or Permit; or

(d) result in the creation or imposition of any Lien (other than Permitted Liens) on any assets of the Company or any of the Subsidiaries.

Section 5.3 Consents; Transfer Restrictions . Except (a) as set forth on Schedule 5.3 , (b) under Contracts that are not Material Contracts and are terminable upon not greater than 60 days’ notice without payment of a fee, (c) for Customary Post-Closing Consents and (d) for immaterial Consents, no Consent is required to be obtained by the Company or any Subsidiary in connection with the execution, delivery and performance of this Agreement, the transfer of the Transferred Interests to Buyer or the consummation of the transactions contemplated by this Agreement or any Transaction Document.

Section 5.4 Contracts.

(a) Schedule 5.4(a) sets forth the following Applicable Contracts in effect as of the Execution Date (the Applicable Contracts listed or which should have been listed on Schedule 5.4(a) , each being a “ Material Contract ”):

(i) the Senior Secured Credit Facility;

(ii) the Operating Agreements and the CMAs;

(iii) each Applicable Contract forming or establishing any partnership or joint venture;

(iv) each Applicable Contract with Seller or any Affiliate of Seller;

(v) each Applicable Contract that constitutes a non-competition agreement, covenant not to compete or any agreement that purports to restrict, limit or prohibit the manner in which, or the locations in which, the assets of the Company or any Subsidiary are or may be located, including area of mutual interest Contracts;

(vi) each Applicable Contract providing transportation services on the Assets which contains a most favored nation or similar provision;

(vii) each Applicable Contract that can reasonably be expected to result in aggregate annual revenues for the Company or any Subsidiary in excess of $7,500,000 in the aggregate;

(viii) each Applicable Contract involving the procurement of goods or services in respect of the construction of the Applicable Facilities providing for payments by the Company or any Subsidiary in excess of $75,000,000 in the aggregate;

(ix) each Applicable Contract involving the procurement of goods or services in respect of the operation of the Applicable Facilities providing for payments by the Company or any Subsidiary in excess of $5,000,000 in the aggregate; and

(x) each Applicable Contract not involving the procurement of goods or services in respect of the construction or operation of the Applicable Facilities providing for payments by the Company or any Subsidiary in excess of $5,000,000 in the aggregate.

(b) True and complete copies of all Material Contracts have been made available to Buyer. Each of the Material Contracts is in full force and effect and constitutes a legal, valid, binding and enforceable obligation of the Company or a Subsidiary and, to the Knowledge of Seller, of the counterparties to such Material Contracts, except that the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, arrangement or other similar Laws relating to or affecting the rights of creditors generally, or by general equitable principles. None of the Company, the Subsidiaries nor Seller has received written notice alleging the Company or any Subsidiary to be in or, to Seller’s Knowledge, is in (and, to Seller’s Knowledge, no counterparty is in), breach or default in any material respect (and, to Seller’s Knowledge, no situation exists which with the passing of time or giving of notice, or both, would create a breach or default) of its (or the counterparties’) material obligations under the Material Contracts.

Section 5.5 Litigation . Except as disclosed on Schedule 5.5 , there is no Proceeding pending or, to Seller’s Knowledge, threatened by or against the Company or any Subsidiary by or before any Governmental Authority or that seeks an Order restraining, enjoining or otherwise prohibiting or making illegal any of the Transactions or the transactions contemplated hereby. Except as set forth on Schedule 5.5 , there are no outstanding material Orders and no unsatisfied material judgments, penalties or awards against or affecting the Company, any Subsidiary, or any of their respective assets. Seller, the Company and the Subsidiaries, as applicable, are in compliance with the terms of each Order set forth on Schedule 5.5 .

Section 5.6 Taxes . Except as set forth on Schedule 5.6 , (a) all Tax Returns required to be filed by the Company or any Subsidiary have been filed; (b) all Taxes due and payable by the Company or any Subsidiary have been paid whether or not shown as due on such Tax Returns; (c) there are no Liens (other than Permitted Liens) on any of the assets (including the Assets) of the Company or any Subsidiary that arose in connection with the failure to pay any Tax by the Company or any Subsidiary; (d) there are no Proceedings, claims or notices of deficiency pending against or threatened in writing

against the Company or any Subsidiary in connection with any Tax; (e) no Tax Returns of the Company or any Subsidiary are currently under audit or examination by any Governmental Authority; (f) there are no agreements or waivers currently in effect that provide for an extension of time with respect to the filing of any Tax Return by the Company or any Subsidiary or the assessment or collection of any Tax from the Company or any Subsidiary; (g) no written claim has been made by any Governmental Authority in a jurisdiction where the Company or any Subsidiary does not file a Tax Return or pay a Tax directly that it is or may be required to file a Tax Return or pay a Tax (as the case may be) in that jurisdiction; (h) none of the Company or any Subsidiary (i) has entered into any agreement or arrangement with any Governmental Authority that requires it to take any action or refrain from taking any action with respect to Tax matters, (ii) is a party to any agreement with any Governmental Authority with respect to Tax matters that would be terminated or adversely affected as a result of the consummation of the transactions contemplated by this Agreement, (iii) has participated in, is currently participating in, or has any liability for the payment of any Tax resulting from a Person’s participation in, any “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4(b) (and all predecessor regulations) or any transaction requiring disclosure under a corresponding or similar provision of state, local or foreign Tax Law), (iv) is a party to any Tax sharing, allocation, indemnity or any similar written or unwritten agreement, arrangement, understanding or practice relating to Taxes with any Person other than the Company and/or any Subsidiary, or (v) has ever been a member of a Consolidated Group and has potential liability for the Taxes of any Person (in each case, other than with respect to the Company, the Seller and/or any Subsidiary) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign Tax Law), as a transferee or successor, by contract or otherwise; and (j) since its formation, the Company and each Subsidiary (i) has either been classified as a partnership or disregarded as an entity separate from its owner for U.S. federal income tax purposes (and state, local or foreign income Tax purposes where applicable) and (ii) has not filed any election to be classified as an association taxable as a corporation for U.S. federal income tax purposes (or for state, local or foreign income Tax purposes where applicable). Notwithstanding any provision in this Agreement to the contrary, (A) the representations and warranties in this Section 5.6 are being made only with respect to Taxes that relate to the Company or any Subsidiary and (B) this Section 5.6 shall be the exclusive representations and warranties of Seller with respect to Tax matters, and no other representations or warranties are made with respect to such matters, including pursuant to Section 5.5 or Section 5.7 .

Section 5.7 Compliance with Laws .

(a) Except as set forth on Schedule 5.7(a) , to Seller’s Knowledge, none of the Company nor any Subsidiary is, nor has been since March 5, 2014, in violation in any material respect of any Laws as in effect on the Execution Date with respect to the Company or any Subsidiary or their respective assets.

(b) Set forth on Schedule 5.7(b) is a list of all material Permits obtained by the Company and the Subsidiaries as of the Execution Date which are necessary under Law in connection with the conduct of their businesses and the ownership, construction, operation and maintenance of their assets (including the Assets), other than immaterial and routine Permits that are expected to be obtained in the ordinary course of business that will not delay construction and operation. To Seller’s Knowledge, none of the Company nor any Subsidiary is in default or violation in any material respect (and, to Seller’s Knowledge, no event has occurred which, with the passing of time or giving of notice, or both, would constitute a default or violation in any material respect) of any term, condition or provision of any such Permit.

(c) Except as set forth on Schedule 5.7(c) , to Seller’s Knowledge, the Company and each of the Subsidiaries holds all material Permits necessary for the lawful conduct of its business and the ownership, construction, operation and maintenance by it of its assets, including its Assets, other than immaterial and routine Permits that are expected to be obtained in the ordinary course of business that will not delay construction and operation.

(d) This Section 5.7 does not include any representations or warranties with respect to Environmental Laws, with such representations or warranties being exclusively addressed in Section 5.8 , or Tax representations or warranties, with such representations or warranties being exclusively addressed in Section 5.6 .

Section 5.8 Environmental Matters .

(a) Buyer has been provided prior to the Execution Date with true and complete copies of, or access to true and correct copies of, any and all Phase I or Phase II Environmental Site Assessments and other reports or documents materially bearing on environmental, health or safety matters of the Company, its Subsidiaries or their assets, including the Assets that are in the possession or reasonable control of Seller, the Company or any Subsidiary for the Real Property Interests in which the Company or any Subsidiary owns an interest.

(b) Except as disclosed on Schedule 5.8(b) or as disclosed in the documents made available to Buyer as described in Section 5.8(a) above (provided that the application of any disclosure in such documents to this Section 5.8 must be reasonably apparent on the face of such disclosure):

(i) to Seller’s Knowledge, the Company and the Subsidiaries are in material compliance with all Environmental Laws and none of the Company nor any Subsidiary has received a written notice, report or other information from any Governmental Authority of any actual or alleged material violations or liabilities under of any applicable Environmental Laws;

(ii) no Proceeding is pending or, to Seller’s Knowledge, threatened against or affecting the Company or any Subsidiary by or before any Governmental Authority with respect to the Company’s or any Subsidiary’s compliance with or liability under any Environmental Laws;

(iii) neither the Company nor any of the Subsidiaries is subject to any outstanding governmental order, “consent order” or other agreement with a Governmental Authority pursuant to Environmental Laws;

(iv) to Seller’s Knowledge, there has been no Release of Hazardous Substances into the environment by the Company or any of the Subsidiaries that could reasonably be expected to give rise to or result in any material Environmental Liability relating to any of the assets in which the Company or any of the Subsidiaries owns an interest (including the Assets) or for which the Company or any Subsidiary could have liability;

(v) none of Seller, the Company nor any of the Subsidiaries has received written inquiry or notice of any actual or alleged Environmental Liabilities, contingent or otherwise, arising from the assets in which the Company or any of the Subsidiaries owns an interest; and

(vi) neither the Company nor any of the Subsidiaries has received written notice or, to Seller’s Knowledge, there is no pending or threatened claim, concerning potential material liabilities to the Company or the Subsidiaries under Environmental Laws as a result of the transportation, storage or disposal of Hazardous Materials.

(c) Set forth on Schedule 5.8(c) is a list of all material Environmental Permits obtained by the Company and the Subsidiaries as of the Execution Date which are necessary under Law in connection with the conduct of their businesses and the ownership, construction, operation and maintenance of their assets (including the Assets), other than immaterial and routine Permits that are expected to be obtained in the ordinary course of business that will not delay construction and operation. To Seller’s Knowledge, none of the Company nor any Subsidiary is in default or violation in any material respect (and, to Seller’s Knowledge, no event has occurred which, with the passing of time or giving of notice, or both, would constitute a default or violation in any material respect) of any term, condition or provision of any such Environmental Permit. To Seller’s Knowledge, the Company and each of the Subsidiaries holds all material Environmental Permits necessary for the lawful conduct of its business and the ownership, construction, operation and maintenance by it of its assets (including its Assets), other than immaterial and routine Permits that are expected to be obtained in the ordinary course of business that will not delay construction and operation.

(d) Notwithstanding any other provision of this Agreement to the contrary, this Section 5.8 contains the sole and exclusive representations and warranties of Seller with respect to applicable Environmental Laws, Proceedings relating to Environmental Laws, Hazardous Substances and any other environmental matters.

Section 5.9 Membership Interests . Except at set forth on Schedule 5.9 :

(a) The Membership Interests constitute all of the issued and outstanding Interests in the Company. The Company does not own or lease any assets other than all of the issued and outstanding Interests in each Holding Company. Dakota Access Holdings does not own or

lease any assets other than a 75% Percent Interest (as defined in the Development Company Agreement for Dakota Access) in Dakota Access. ETCO Holdings does not own or lease any assets other than a 75% Percent Interest (as defined in the Development Company Agreement for ETCO) in ETCO. Dakota Access owns all of the issued and outstanding Interests in Dakota Truck. ETCO owns all of the issued and outstanding Interests in EGCA. Each of such Interests owned by the Company, Dakota Access Holdings, ETCO Holdings, or Dakota Access, as applicable, (i) are owned by it beneficially and of record free and clear of all Liens and are not subject to any agreements or understandings among any Persons with respect to the voting or transfer thereof (other than in the Organizational Documents of the Company, Dakota Access Holdings, Dakota Access, ETCO Holdings, ETCO, Dakota Truck or EGCA, as applicable); (ii) are not subject to any outstanding subscriptions, options, convertible securities, warrants, calls or other securities granting rights to purchase or otherwise acquire any of such Interests or any commitments or agreements of any character obligating the Company, Dakota Access Holdings and ETCO Holdings, as applicable, to transfer any of such Interests (other than as set forth in the Organizational Documents of the Company, Dakota Access Holdings, Dakota Access, ETCO Holdings, ETCO, Dakota Truck or EGCA, as applicable); and (iii) are duly authorized, validly issued, fully paid and, subject to the Laws of the State of Delaware, non-assessable, and were not issued in violation of any applicable Laws, the Organizational Documents of the Company, Dakota Access Holdings or ETCO Holdings, as applicable, or any purchase option, call option, right of first refusal, preemptive right or other similar right.

(b) Excluding the Subsidiaries, none of the Company, the Holding Companies, the Development Companies, Dakota Truck and EGCA have any subsidiaries or Interests in any Person.

Section 5.10 Title Matters; Real Property Interests .

(a) To Seller’s Knowledge, (i) the Company and each Subsidiary and each of the counterparties is in material compliance with, and not in default in any material respects under, each real property lease, easement, servitude, right-of-way and surface right that constitutes a Real Property Interest; (ii) no event has occurred or circumstance exists that, with or without the delivery of notice, the passage of time or both, would constitute a material default under, or permit the termination, modification or acceleration of amounts due under any such agreement; and (iii) each such agreement is legal, valid, binding, enforceable and in full force and effect, subject to the effect of any applicable Laws relating to bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or preferential transfers, or similar Laws relating to or affecting creditors’ rights generally.

(b) To Seller’s Knowledge, the Company and each Subsidiary has good and valid title to all of the Personal Property free and clear of all Liens other than Permitted Liens.

Section 5.11 Balance Sheet .

(a) The Balance Sheet, which is attached as Schedule 5.11(a) , (a) has been derived from the books and records of the Company, (b) has been prepared in accordance with GAAP consistently applied throughout the periods covered thereby (except for, in the case of interim

statements, normal year-end adjustments and the absence of footnote disclosure that, if presented, would not differ materially from those presented in an audited balance sheet), and (c) fairly presents in all material respects the financial condition of the Company as of the Balance Sheet Date.

(b) The Company has no liabilities of the type required to be reflected on a balance sheet prepared in accordance with GAAP, except for (i) liabilities which are adequately reflected in or reserved against in the Balance Sheet, (ii) liabilities evidenced by the Senior Secured Credit Facility and (iii) liabilities which have been incurred in the Ordinary Course of Business since the Balance Sheet Date.

Section 5.12 Indebtedness . Except as set forth in Schedule 5.12 and liabilities evidenced by the Senior Secured Credit Facility, the Company and the Subsidiaries have no Indebtedness from or to any Person.

Section 5.13 Credit Support . Schedule 5.13 lists all guarantees, letters of credit, sureties, performance, or other bonds, cash or other collateral or similar credit support arrangements (the “ Support Instruments ”) maintained by Seller or any of its Affiliates (excluding the Company or any Subsidiary) with respect to the Company, any Subsidiary or the Assets, true and complete copies of which have been made available to Buyer.

Section 5.14 Employees; Benefit Plan Matters . Neither the Company nor any Subsidiary has or ever has had any employees. None of Seller, the Company or any of the Subsidiaries maintains, sponsors, contributes to, or is a participating employer of, nor has Seller, the Company or any of the Subsidiaries ever maintained, sponsored, contributed to or participated in, any Benefit Plan .

Section 5.15 Insurance . Schedule 5.15(a) sets forth a summary of all insurance policies maintained by or on behalf of the Company and the Subsidiaries. All such insurance policies are in full force and effect and all related premiums due and payable with respect thereto have been paid. Except as set forth in Schedule 5.15(b) , there is no material claim pending under any such insurance policies as to which coverage has been denied by the insurer other than customary indications as to reservation of rights by insurers listed on Schedule 5.15(a) and none of Seller, the Company nor any of the Subsidiaries has received written notice of cancellation of any such insurance policies.

Section 5.16 Brokers Fees . Neither the Company nor any Subsidiary has any liability or obligation to pay any fees or commissions to any broker, finder, agent or other Person with respect to the transactions contemplated hereby or the Transactions.

Section 5.17 No Bankruptcy . There are no bankruptcy Proceedings pending against, being contemplated by or, to the Knowledge of Seller, threatened against or affecting the Company or any of the Subsidiaries.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Seller as of the Execution Date as follows:

Section 6.1 Organization of Buyer . Buyer is a limited liability company, duly organized and validly existing under the Laws of the State of Delaware, is qualified to do business and is in good standing under the Laws of any jurisdiction where such qualification is necessary, and has full power and right to carry on its business as such is now being conducted.

Section 6.2 Authorization; Enforceability . Buyer has all requisite power and authority to execute and deliver this Agreement and each Transaction Document to which Buyer is a party, to purchase the Transferred Interests on the terms described herein and to perform all obligations to be performed by Buyer hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and each Transaction Document to which Buyer is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized and approved by all limited liability company action required on the part of Buyer. This Agreement constitutes, and each Transaction Document to which Buyer is a party, when duly and validly executed and delivered by Buyer will constitute (assuming due authorization, execution and delivery by Seller and any other Persons party thereto that is not an Affiliate of Buyer), legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity (regardless of whether such enforceability is considered in a Proceeding in equity or at Law).

Section 6.3 No Conflict; Consents . Except as set forth on Schedule 6.3 , Buyer’s execution, delivery and performance of this Agreement and the Transaction Documents to which Buyer is a party and the consummation of the transactions contemplated hereby and thereby by Buyer shall not:

(a) violate or result in a breach of, or conflict with or require the consent of any Person under, any of the terms, conditions or provisions of the Organizational Documents of Buyer;

(b) violate or result in a material breach of any provision of any Laws applicable to Buyer; or

(c) conflict with, result in a breach of, constitute a default under or constitute an event that with notice or lapse of time, or both, would constitute a default under, accelerate or permit the acceleration of the performance required by any Contract to which Buyer is a party or bound, except where such conflict, breach, default or acceleration would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Buyer’s ability to consummate

the transactions contemplated by this Agreement and the Transaction Documents and to perform its obligations hereunder and thereunder.

Section 6.4 Consents and Approvals . Except (a) for Customary Post-Closing Consents and (b) for immaterial Consents, no Consent is required to be obtained by Buyer in connection with the execution, delivery or performance of this Agreement or the Transaction Documents or the consummation of the transactions contemplated hereby or thereby by Buyer.

Section 6.5 Litigation . As of the Execution Date, there is no Proceeding (filed by any Person other than Seller or any of its Affiliates) pending or, to Buyer’s Knowledge, threatened by or against the Buyer by or before any Governmental Authority that would reasonably be expected to result in a material adverse effect on Buyer’s ability to consummate the transactions contemplated by this Agreement or that seeks an Order restraining, enjoining or otherwise prohibiting or making illegal any of the Transactions or the transactions contemplated hereby.

Section 6.6 Brokers’ Fees . Neither Buyer nor any of its Affiliates has any liability or obligation to pay any fees or commissions to any broker, finder, agent or other Person with respect to the transactions contemplated hereby or the Transactions for which Seller or its Affiliates will become liable or obligated.

Section 6.7 Financial Ability . Buyer, at the Closing, will have funds sufficient to (a) pay the Purchase Price and any other expenses incurred by Buyer in connection with this Agreement; (b) fund the consummation of the transactions contemplated by this Agreement and the Transaction Documents; and (c) satisfy all other costs and expenses arising in connection herewith and therewith, each without delay and without causing Buyer to become insolvent or declare insolvency.

Section 6.8 Regulatory . Buyer is now, and hereafter shall continue to be, qualified per all regulations of applicable Governmental Authorities and other Laws to own the Transferred Interests; and the consummation of the transactions contemplated in this Agreement will not cause Buyer to be disqualified as such an owner.

Section 6.9 Independent Evaluation . Buyer is sophisticated in the evaluation, purchase, ownership and operation of crude oil pipeline assets and facilities. In making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, except for its reliance on Seller’s representations and warranties in Article IV and Article V , Buyer (a) has relied or shall rely solely on its own independent investigation and evaluation of the Company, the Subsidiaries and the Assets and the advice of its own legal, Tax, economic, environmental, engineering, geological and geophysical advisors and the express provisions of this Agreement and the Transaction Documents and not on any comments, statements, projections or other materials made or given by Seller or any of its Affiliates or Representatives, and (b) has satisfied or will satisfy itself through its own due diligence as to the environmental and physical condition of and contractual arrangements and other matters affecting the Company, the Subsidiaries and the Assets.

Without limiting the generality of the foregoing, Buyer acknowledges that, except to the extent expressly set forth in this Agreement or the Transaction Documents, none of Seller, the Company, the Subsidiaries nor any of their Representatives or Affiliates make any representation or warranty with respect to (a) any projections, estimates or budgets delivered to or made available to Buyer of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of the Company or the Subsidiaries or the future business and operations of the Company or the Subsidiaries, or (b) any other information or documents made available to Buyer or its Representatives with respect to the Company, the Subsidiaries or their businesses, Assets, liabilities or operations, and, except to the extent expressly set forth in this Agreement or the Transaction Documents, that all such projections, estimates, budgets or other information or documents have been furnished to Buyer solely as an accommodation. Buyer further acknowledges that it has not relied on any representation not expressly set forth in this Agreement.

Section 6.10 Accredited Investor . Buyer is acquiring the Transferred Interests for its own account as an investment without the present intent to sell, transfer or otherwise distribute the same to any other Person in violation of applicable securities Laws. Buyer has made, independently and without reliance on Seller (except to the extent that Buyer has relied on the representations, warranties, covenants and agreements of Seller in this Agreement), its own analysis of the Transferred Interests and the Assets for the purpose of acquiring the Transferred Interests, and Buyer has had reasonable and sufficient access to documents, other information and materials as it considers appropriate to make its evaluations. Buyer is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended, and has acquired or will acquire the Transferred Interests for its own account and not with a view to a sale or distribution thereof in violation of the Securities Act of 1933, as amended, and the rules and regulations thereunder, any applicable state blue sky Laws or any other applicable securities Laws.

ARTICLE VII
COVENANTS

Section 7.1 Conduct of Business, Operation of Assets .

(a) From the Execution Date until the earlier of the Closing or the termination of this Agreement in accordance with Article XI , except (1) for Emergency Operations or (2) for the actions expressly permitted or required under the terms of this Agreement or consented to in writing by Buyer (which consent shall not be unreasonably delayed, withheld or conditioned), Seller shall, and in its capacity as owner of the Membership Interests, Seller shall cause the Company and each Subsidiary to,:

(i) operate its assets (including the Assets) and its business, and maintain its books of account and Records, in the Ordinary Course of Business;

(ii) give written notice to Buyer as soon as is practicable of any written notice received or given by Seller, the Company or any Subsidiary with respect to any

alleged breach by the Company, any Subsidiary or other Person of any Material Contract, Real Property Interest or Permit;

(iii) with respect to Emergency Operations, notify Buyer of such emergency and the related Emergency Operations as soon as reasonably practicable;

(iv) give prompt notice to Buyer of (A) any material damage or any casualty to any of the Assets, (B) any written notice received or made by Seller, the Company or any Subsidiary of any claim asserting any material tort or violation of Law or any new or threatened Proceeding, that (in each case) relates to or affects the Company, the Subsidiaries or the Assets; and (C) any breach by Seller of any representation, warranty, covenant or agreement of Seller contained in this Agreement;

(v) update Schedule 5.4(a) with each Applicable Contract entered into by the Company or any Subsidiary from and after the Execution Date that if such Applicable Contract would have been in place as of the Execution Date would have been required to be listed on Schedule 5.4(a) as permitted under this Agreement and furnish Buyer a copy thereof;

(vi) timely file all Tax Returns required to be filed by the Company or any Subsidiary and timely pay all Taxes due and payable by the Company or any Subsidiary; and

(vii) comply with the obligations set forth in Section 5.1(e) of the Company Agreement.

(b) Without limiting the generality or effect of Section 7.1(a) , from the Execution Date until the earlier of the Closing or the termination of this Agreement in accordance with Article XI , except (1) for Emergency Operations or (2) for the actions expressly permitted or required under the terms of this Agreement or consented to in writing by Buyer (which consent shall not be unreasonably delayed, withheld or conditioned), Seller shall not, and in its capacity as owner of the Membership Interests, Seller shall cause the Company and each Subsidiary not to, (i) take any action set forth in Section 5.1(c) or Section 15.6 of the Company Agreement or agree, whether in writing or otherwise, to take any action set forth therein or (ii) make any agreement or settlement with any Governmental Authority in respect of Taxes, file any amended Tax Return or consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment.

Section 7.2 Access and Information . From the Execution Date until the earlier of the Closing or the termination of this Agreement in accordance with Article XI , but subject to the other provisions of this Section 7.2 and obtaining any required Consents of Third Parties (with respect to which Consents Seller shall use commercially reasonable efforts to obtain), Seller shall, and in its capacity as owner of the Membership Interests Seller shall cause the Company and each Subsidiary to, (a) afford to Buyer and its Representatives reasonable access, upon reasonable prior notice, during normal business hours, to the Records and (b) make available to Buyer and its Representatives, upon reasonable notice during normal business hours, Seller’s and its Affiliates’ personnel

knowledgeable with respect to the Assets and the other assets of the Company and the Subsidiaries. Buyer shall not be permitted to conduct any physical inspection of the Assets except as, and under terms and conditions, agreed to by Seller; provided , however , that any request by Buyer for any such inspection shall not be unreasonably withheld, conditioned or delayed. All review and investigations conducted by Buyer or any of its Representative shall be conducted at Buyer’s sole cost, risk and expense and any conclusions made from any examination done by Buyer or any of its Representative shall result from Buyer’s own independent review and judgment. In addition, the review and investigations of Buyer shall not unreasonably interfere with the business of the Company or any Subsidiary or the safe commercial operations of the Assets. Buyer shall coordinate Buyer’s and its Representatives’ access rights (including with respect to Seller’s personnel) with Seller to minimize any inconvenience to or interruption of the conduct of business by Seller, the Company and the Subsidiaries. Buyer shall hold in confidence all information reviewed and collected pursuant to this Section 7.2 on the terms and subject to the conditions contained in the Confidentiality Agreements. Notwithstanding anything to the contrary in this Section 7.2 , Buyer shall have no right of access to, and neither Seller nor any of its Affiliates shall have any obligation to provide any (1) information the disclosure of which (A) would reasonably be expected to jeopardize any privilege available to Seller or its Affiliates, (B) would cause Seller or its Affiliates to breach a confidentiality obligation (provided that Seller and its Affiliates shall use commercially reasonable efforts to obtain a waiver of any such confidentiality obligation), or (C) would result in a violation of Law, or (2) bids received from others in connection with the transactions contemplated by this Agreement (or similar transactions) and information and analyses (including financial analyses) relating to such bids.

Section 7.3 Regulatory Filings . From the Execution Date until the Closing:

(a) Buyer and Seller shall, and shall cause their respective Affiliates to, (i) make or cause to be made the filings required of such Party or any of its Affiliates under any Laws with respect to the transactions contemplated by this Agreement and the Transactions and to pay any fees due of it in connection with such filings, as promptly as is reasonably practicable, and in any event within ten (10) Business Days after the Execution Date, (ii) cooperate with the other Party and furnish all information in such Party’s possession that is necessary in connection with such other Party’s filings, (iii) use commercially reasonable efforts to cause the expiration of the notice or waiting periods under any Laws with respect to the transactions contemplated by this Agreement and the Transactions as promptly as is reasonably practicable, (iv) promptly inform the other Party of any communication from or to, and any proposed understanding or agreement with, any Governmental Authority in respect of such filings, (v) consult and cooperate with the other Party in connection with any analyses, appearances, presentations, memoranda, briefs, arguments and opinions made or submitted by or on behalf of any Party in connection with all meetings, actions and proceedings with Governmental Authorities relating to such filings, (vi) comply, as promptly as is reasonably practicable, with any requests received by such Party or any of its Affiliates under any Laws for additional information, documents or other materials, (vii) use commercially reasonable efforts to resolve any objections as may be asserted by any Governmental Authority with respect to the Transactions, and (viii) use commercially reasonable efforts to contest and resist

any action or proceeding instituted (or threatened in writing to be instituted) by any Governmental Authority challenging the transactions contemplated by this Agreement or the Transactions as violative of any Law. If a Party intends to participate in any meeting with any Governmental Authority with respect to such filings, it shall give the other Party reasonable prior notice of, and an opportunity to participate in, such meeting.

(b) In connection with any such filings, Buyer shall cooperate in good faith with Governmental Authorities and, subject to Section 7.3(c) , undertake promptly any and all commercially reasonable action required to complete lawfully the transactions contemplated by this Agreement and the Transactions. Buyer shall be entitled to direct any proceedings or negotiations with any Governmental Authority to the extent, and only to the extent, relating to any such actions, provided that it shall allow Seller to participate in each and every communication relating to any such actions.

(c) Notwithstanding anything provided in this Agreement to the contrary, neither Seller nor Buyer nor any of their respective Affiliates shall have any obligation to sell, divest, dispose, license, lease, operate, conduct in a specified manner, hold separate or discontinue or restrict or limit any assets, businesses, product lines, licenses, operations or interests to obtain the approval of any Governmental Authority.

Section 7.4 Consents . With respect to each Required Consent, prior to Closing, Seller shall send to the holder of each such Consent a notice in compliance with the contractual provisions applicable to such Consent seeking such holder’s consent to the transactions contemplated hereby (including the Transactions). Prior to Closing, Seller shall use its commercially reasonable efforts, with reasonable assistance from Buyer, to obtain all Required Consents; provided, however , that Seller shall not be required to incur any liability or pay any money in order to obtain any such Consent.

Section 7.5 Amendment of Schedules . Buyer agrees that, with respect to the representations and warranties of Seller contained in this Agreement, Seller shall have the continuing right until Closing to add, supplement or amend the Schedules to its representations and warranties with respect to any matter hereafter first arising which, if existing as of the Execution Date, would have been required to be set forth or described in such Schedules; provided that, Seller shall not have the right to add, supplement or amend any such Schedules for any matter arising out of or as a result of any breach by Seller of this Agreement. For all purposes of this Agreement, including for purposes of determining whether the conditions set forth in Section 8.1 have been fulfilled, the Schedules to Seller’s representations and warranties contained in this Agreement shall be deemed to include only that information contained therein on the Execution Date and shall be deemed to exclude all information contained in any addition, supplement or amendment thereto (the “ Post-Signing Information ”); provided, however , that if Closing shall occur, and if Buyer would have had the right to terminate this Agreement on account of a breach of Seller’s representations, warranties, covenants or agreements under this Agreement relating to the Post-Signing Information (such right having been confirmed in writing by Seller prior to Closing), then all Post-Signing Information disclosed pursuant

to any such addition, supplement or amendment at or prior to Closing shall be waived and Buyer shall not be entitled to make a claim with respect thereto pursuant to the terms of this Agreement or otherwise.

Section 7.6 Further Assurances . Subject to the terms and conditions of this Agreement, through the Closing Date, each Party shall use its commercially reasonable efforts to take, or cause to be taken, all actions required by the terms of this Agreement of such Party that are reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement and the Transactions. Subject to the terms and conditions of this Agreement, at any time or from time to time after the Closing, at any Party’s request and without further consideration, the other Party shall (and in the case of Buyer and Seller, each such Party shall use commercially reasonable efforts to cause the applicable members of the Company to) execute and deliver to such Party such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as such Party may reasonably request in order to consummate the transactions contemplated by this Agreement and the Transactions.

Section 7.7 Exclusivity . From the Execution Date until the earlier of the Closing or the termination of this Agreement in accordance with Article XI , Seller shall not, and shall not authorize or permit any of its Affiliates (including the Company and the Subsidiaries) or any of its or their Representatives to, directly or indirectly, (a) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition Proposal; (b) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal; or (c) enter into any agreements or other instruments (whether or not binding) regarding an Acquisition Proposal. From the Execution Date until the earlier of the Closing or the termination of this Agreement in accordance with Article XI , Seller shall immediately cease and cause to be terminated, and shall cause its Affiliates (including the Company and the Subsidiaries) and all of its and their Representatives to immediately cease and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that could lead to, an Acquisition Proposal. For purposes hereof, “ Acquisition Proposal ” shall mean any inquiry, proposal or offer from any Person (other than Buyer or any of its Affiliates) concerning (A) a merger, consolidation, liquidation, recapitalization or other business combination transaction involving Seller, the Company or any of the Subsidiaries; (B) the issuance or acquisition of membership interests in Seller, the Company or any of the Subsidiaries; or (C) the sale, lease, exchange or other disposition of any significant portion of the assets of Seller, the Company or any of the Subsidiaries.

Section 7.8 Senior Secured Credit Facility . Seller shall, and shall cause the Development Companies to, use reasonable best efforts to diligently take all necessary actions and other measures to effect the timely satisfaction of each of the conditions precedent to the advancement of Loans under the applicable requirements of the Senior Secured Credit Facility.

ARTICLE VIII
CONDITIONS TO CLOSING

Section 8.1 Buyer’s Conditions to Closing . The obligation of Buyer to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions, any one or more of which may be waived in writing by Buyer:

(a) Representations . Each of the representations and warranties of Seller contained in this Agreement shall be true and correct as of the Closing, as if made at and as of that time (other than such representations and warranties that expressly address matters only as of a certain date, which need only be true and correct as of such certain date) without giving effect to the words “material,” or “Material Adverse Effect” or words of similar import contained in such representations and warranties, except where the failure of such representations and warranties to be so true and correct would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; provided that (i) the Fundamental Representations shall be true and correct as of the Closing, as if made at and as of that time, in all respects and (ii) for purposes of this Section 8.1(a) , the reference to “as of the Execution Date” in the lead in to Article IV and Article V , which precedes respectively Sections 4.1 and 5.1 , shall be disregarded.

(b) Performance. Seller shall have performed or complied in all material respects with all of the covenants and agreements required by this Agreement to be performed or complied with by Seller prior to the Closing.

(c) Closing Certificate . Seller shall have delivered to Buyer an officer’s certificate dated the Closing Date certifying that the conditions specified in Section 8.1(a) , if applicable, and Section 8.1(b) have been fulfilled.

(d) No Action . There shall not be in force any Law or Order restraining or prohibiting the consummation of the transactions contemplated by this Agreement and no Proceeding (excluding any Proceeding initiated by Buyer or any of its Affiliates) shall be pending before any court or other Governmental Authority seeking to temporarily restrain, enjoin or otherwise prohibit or make illegal the consummation of the transactions contemplated by this Agreement or recover damages from Buyer, the Company, or any of the Subsidiaries resulting therefrom.

(e) Deliveries . Seller shall have delivered (or be ready, willing and able to deliver at Closing) the documents and other items required to be delivered by Seller under Section 9.2 .

(f) ACOE Release Date . The “ACOE Release Date” (as defined in the Senior Secured Credit Facility) shall have occurred.

(g) Consents and Approvals. The Required Consents shall have been duly obtained, made or given and shall be in the full force and effect.

(h) Material Adverse Effect. A Material Adverse Effect shall not have occurred since the Execution Date.

Section 8.2 Conditions to the Obligations of Seller . The obligation of Seller to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions, any one or more of which may be waived in writing by Seller:

(a) Representations . Each of the representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects (and in all respects, in the case of representations and warranties qualified by materiality qualifiers contained therein) as of the Closing, as if made at and as of that time (other than such representations and warranties that expressly address matters only as of a certain date, which need only be true and correct in all material respects (and in all respects, in the case of representations and warranties qualified by materiality qualifiers contained therein) as of such certain date; provided that, for purposes of this Section 8.2(a) , the reference to “as of the Execution Date” in the lead in to Article VI , which precedes Section 6.1 , shall be disregarded).

(b) Performance. Buyer shall have performed or complied in all material respects with all of the covenants and agreements required by this Agreement to be performed or complied with by Buyer prior to the Closing.

(c) Closing Certificate . Buyer shall have delivered to Seller an officer’s certificate dated the Closing Date certifying that the conditions specified in Section 8.2(a) and Section 8.2(b) have been fulfilled.

(d) No Action . There shall not be in force any Law or Order restraining or prohibiting the consummation of the transactions contemplated by this Agreement and no Proceeding (excluding any Proceeding initiated by Seller or any of its Affiliates) shall be pending before any court or other Governmental Authority seeking to temporarily restrain, enjoin or otherwise prohibit or make illegal the consummation of the transactions contemplated by this Agreement or recover damages from Seller, the Company, or any of the Subsidiaries resulting therefrom.

(e) Deliveries . Buyer shall have delivered (or be ready, willing and able to deliver at Closing) the documents and other items required to be delivered by Buyer under Section 9.3 .

ARTICLE IX
CLOSING

Section 9.1 Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Porter Hedges LLP, 1000 Main Street, Houston, Texas 77002, commencing at 9:00 a.m. local time the fifth (5 ^th ) Business Day after all conditions to Closing in Section 8.1 or Section 8.2 have been satisfied or waived, or such other date as Buyer and Seller may mutually determine (the “ Closing Date ”).

Section 9.2 Seller Deliverables . At the Closing, Seller will execute and deliver, or cause to be executed and delivered, the following documents and deliverables to Buyer:

(a) the Assignment;

(b) the Company Agreement;

(d) an executed statement(s) described in Section 1.1445-2(b)(2) of the Treasury Regulations certifying that Seller is not a disregarded entity nor a foreign person within the meaning of the Code and the Treasury Regulations promulgated thereunder;

(e) the certificate referenced in Section 8.1(c) ; and

(f) any other Transaction Documents that are required by other terms of this Agreement to be executed or delivered by Seller at the Closing.

Section 9.3 Buyer Deliverables . At the Closing, Buyer will execute (as appropriate) and deliver, or cause to be executed and delivered, the following documents and deliverables to Seller:

(a) the Assignment;

(b) the Company Agreement;

(d) to the accounts as designated by Seller prior to Closing, by direct bank or wire transfer in same day funds, the Purchase Price;

(e) the certificate referenced in Section 8.2(c) ; and

(f) any other Transaction Documents that are required by other terms of this Agreement to be executed or delivered by Buyer at the Closing.

ARTICLE X
INDEMNIFICATION

Section 10.1 Survival .

(a) Subject to Section 10.1(b) , (i) the representations and warranties of Seller contained in Article IV and Article V and in the certificate delivered pursuant to Section 8.1(c) and the representations and warranties of Buyer contained in Article VI and in the certificate delivered pursuant to Section 8.2(c) and (ii) the covenants and agreements of Seller and Buyer contained in this Agreement shall survive the Closing and shall, in each case, continue in force and effect until eighteen (18) months after the Closing Date, except that (A) the representations and warranties of (1) Seller contained in Section 4.1 , Section 4.2 , Section 4. 3, Section 4.4 , Section 4.5 , Section 4.6 , Section 5.1 , Section 5.2 , Section 5.3 , Section 5.9 and Section 5.16 (collectively the “ Fundamental Representations ”) and (2) Buyer contained in Section 6.1 , Section 6.2 , Section 6.3 , Section 6.4 and

Section 6.6 , shall survive indefinitely; (B) the representations and warranties of Seller contained in Section 5.6 (the “ Tax Representations ”) shall survive the Closing until thirty (30) days following the expiration of the applicable statute of limitations; and (C) any covenant or agreement which by its terms contemplates performance after the Closing Date, shall survive until the date that is 60 days after the earlier of (i) the date that such covenant or agreement expires by its terms or (ii) the expiration of any applicable statute of limitations. Representations, warranties, covenants and agreements shall be of no further force and effect after the date of their expiration, provided that there shall be no termination of any bona fide claim asserted pursuant to this Agreement with respect to such a representation, warranty, covenant or agreement prior to its expiration date.

(b) The indemnities in Section 10.2(a)(i) , Section 10.2(a)(ii) , Section 10.2(a)(iii) , Section 10.3(a) and Section 10.3(b) shall terminate as of the termination date of each respective representation, warranty, covenant or agreement that is subject to indemnification. Notwithstanding the foregoing, there shall be no termination of any bona fide claim asserted pursuant to the indemnities in this Article X if a bona fide claim is asserted prior to the date of termination for the applicable indemnity.

Section 10.2 Indemnification Provisions for Benefit of Buyer .

(a) From and after the Closing and subject to the terms and conditions hereof, Seller shall indemnify, defend and hold harmless Buyer and its Affiliates and each of their respective members, managers, partners and Representatives (the “ Buyer Indemnified Parties ”) from and against any and all Damages incurred or suffered as a result of, relating to or arising out of:

(i) any breach prior to or as of the Closing Date of any representation or warranty made by Seller in Article IV ; provided , however , in determining the amount of Damages arising out of, resulting therefrom or relating thereto, any materiality, Material Adverse Effect or other similar qualification contained therein shall be disregarded in its entirety;

(ii) any breach prior to or as of the Closing Date of any representation or warranty made by Seller in Article V ; provided , however , in determining the amount of Damages arising out of, resulting therefrom or relating thereto, any materiality, Material Adverse Effect or other similar qualification contained therein shall be disregarded in its entirety;

(iii) any breach by Seller of any covenant or agreement made or to be performed by Seller pursuant to this Agreement; and

(iv) Seller Taxes.

Section 10.3 Indemnification Provisions for Benefit of Seller . From and after the Closing, Buyer shall indemnify, defend and hold harmless Seller and its Affiliates and each of their members, managers, partners and Representatives (the “ Seller Indemnified Parties ”) from and against any and all Damages incurred or suffered as a result of, relating to or arising out of:

(a) any breach of any representation or warranty prior to or as of the Closing Date made by Buyer in Article VI ; and

(b) any breach by Buyer of any covenant or agreement made or to be performed by Buyer pursuant to this Agreement.

Section 10.4 Limitation on Liability .

(a) Notwithstanding anything herein to the contrary, (a) Seller will not be liable for any claim (or series of claims arising out of the same or related facts, events or circumstances) under Section 10.2(a)(i) or Section 10.2(a)(ii) for any Damages asserted against Seller thereunder unless such Damages for such claim (or series of claims arising out of the same or related facts, events or circumstances) exceed $250,000 (the “ Indemnity Claim Threshold ”); (b) Seller will not be liable for any claim under Section 10.2(a)(i) or Section 10.2(a)(ii) until the Buyer Indemnified Parties have suffered aggregate Damages for claims under Section 10.2(a)(i) and Section 10.2(a)(ii) in excess of 1.0% of the Purchase Price paid to Seller (the “ Deductible ”); and (c) in no event shall Seller’s aggregate liability arising out of or related to this Agreement, whether relating to a breach of representation and warranty, covenant, agreement or obligation in this Agreement or otherwise and whether based on contract, tort, strict liability, other Laws or otherwise, exceed 10% of the Purchase Price paid to Seller, provided however , that the limitations in clauses (a), (b) and (c) shall not apply to any breach by Seller of any Fundamental Representation or Tax Representations and the limitations in clause (c) shall not apply to Seller’s obligations under Section 10.2(a)(iv) . For the avoidance of doubt, (A) any Damages asserted against Seller hereunder that do not exceed the Indemnity Claim Threshold shall not be counted in determining the Deductible for Seller, and (B) the Buyer Indemnified Parties shall only be entitled to recover Damages from Seller in excess of the Deductible.

(b) Seller shall have no liability pursuant to this Article X in respect and to the extent of any item or any losses that have been reflected as a liability or reserve reflected on the Balance Sheet.

(c) Seller shall have no liability for any losses that represent the cost of remediations, repairs, replacements or improvements which enhance the value of the remediated, repaired, replaced or improved asset above its value on the Closing Date (assuming, solely for purposes of determining the value of such asset as of the Closing Date, that no such remediation, repair, replacement or improvement were necessary) or which represent the cost of remediation, repair or replacement exceeding the lowest reasonable cost of remediation, repair or replacement.

(d) The Parties shall have a duty to mitigate any loss for which indemnity is sought in connection with this Agreement. The Seller Indemnified Parties and the Buyer Indemnified Parties, as applicable, shall use their commercially reasonable efforts to seek Third Party and insurance recoveries in respect of losses. In the event any insurance proceeds or other recoveries from Third Parties are actually realized (in each case calculated net of reasonable Third Party out-of-pocket costs and expenses of such recoveries but not including any costs or expenses attributable to increases in insurance premiums) by a Seller Indemnified Party or a Buyer Indemnified Party subsequent to the receipt by such Indemnified Party of an indemnification or other payment

hereunder in respect of the claims to which such insurance proceedings or Third Party recoveries relate, appropriate refunds shall be made promptly to the Indemnifying Party regarding the amount of such payment.

(e) Under no circumstance shall any Buyer Indemnified Party be permitted to offset any amounts owed by Seller to such Buyer Indemnified Party in respect of any indemnification obligation hereunder against any amounts owed by such Buyer Indemnified Party to Seller. Under no circumstance shall any Seller Indemnified Party be permitted to offset any amounts owed by Buyer to such Seller Indemnified Party in respect of any indemnification obligation hereunder against any amounts owed by such Seller Indemnified Party to Buyer.

Section 10.5 Procedures . Claims for indemnification under this Agreement shall be asserted and resolved as follows:

(a) If any Person entitled to seek indemnification under Section 10.2 or Section 10.3 (an “ Indemnified Party ”) receives notice of the assertion or commencement of any claim asserted against an Indemnified Party by a Third Party (“ Third Party Claim ”) in respect of any matter that is subject to indemnification under Section 10.2 or Section 10.3 the Indemnified Party shall promptly (i) notify the Party against whom indemnification is sought (the “ Indemnifying Party ”) of the Third Party Claim and (ii) transmit to the Indemnifying Party a written notice (“ Claim Notice ”) describing in reasonable detail the nature of the Third Party Claim, a copy of all papers served with respect to such claim (if any), the Indemnified Party’s best estimate of the amount of Damages attributable to the Third Party Claim, if known, and the basis of the Indemnified Party’s request for indemnification under this Agreement. Failure to timely provide such Claim Notice shall not affect the right of the Indemnified Party’s indemnification hereunder, except to the extent (and then only to the extent) the Indemnifying Party is prejudiced by such failure.

(b) The Indemnifying Party shall defend a Third Party Claim with counsel selected by the Indemnifying Party (who shall be reasonably satisfactory to the Indemnified Party), by all appropriate proceedings, to a final conclusion or settlement at the discretion of the Indemnifying Party in accordance with this Section 10.5(b) . The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof; provided that the prior written consent of the Indemnified Party shall be required with respect to any such compromise or settlement if (A) the Indemnified Party or any of its Affiliates would be required to pay any monetary damages as a result of such compromise or settlement, (B) such compromise or settlement requires any admission of guilt or wrongdoing on the part of the Indemnified Party or contains any sanction, restriction or relief that would adversely affect the conduct of any business of the Indemnified Party or its Affiliates in any material respect or (C) such compromise or settlement does not fully and unconditionally release the Indemnified Party with respect to such Third Party Claim. If requested by the Indemnifying Party, the Indemnified Party agrees, at the sole cost and expense of the Indemnifying Party, to reasonably cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim which the Indemnifying Party elects to contest, including the making of any related counterclaim against the Person asserting the Third Party Claim or any cross complaint against any Person. The Indemnified Party may participate in, but not control, any defense or settlement of any Third Party Claim controlled by the Ind

emnifying Party pursuant to this Section 10.5(b) , and the Indemnified Party shall bear its own costs and expenses with respect to such participation; provided that notwithstanding the foregoing, the Indemnifying Party shall pay the reasonable costs and expenses of such defense (including reasonable attorneys’ fees and expenses) of the Indemnified Party if (x) the Indemnified Party’s outside counsel shall have reasonably concluded and advised in writing (with a copy to the Indemnifying Party) that there are defenses available to such Indemnified Party that are different from or additional to those available to the Indemnifying Party or (y) the Indemnified Party’s outside counsel shall have advised in writing (with a copy to the Indemnifying Party) that there is a conflict of interest that would make it inappropriate under applicable standards of professional conduct to have common counsel for the Indemnifying Party and the Indemnified Party.

(c) Any claim by an Indemnified Party on account of Damages that does not result from a Third Party Claim (a “ Direct Claim ”) must be asserted by giving the Indemnifying Party written notice thereof prior to the expiration of the applicable survival period set forth in Section 10.1 . Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, include copies of all available material written evidence thereof and indicate the estimated amount, if reasonably practicable, of Damages that have been or may be sustained by the Indemnified Party. The Indemnifying Party will have a period of twenty (20) Business Days within which to respond in writing to such Direct Claim. If the Indemnifying Party does not so respond within such twenty (20) Business Day period, the Indemnifying Party will be deemed to have rejected such claim, in which event the Indemnified Party will be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.

(d) Any indemnification payment made pursuant to this Agreement shall be net of any insurance proceeds realized by and paid to the Indemnified Party in respect of such claim.

Section 10.6 Express Negligence . TO THE FULLEST EXTENT PERMITTED BY LAW, AN INDEMNIFIED PERSON SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE INDEMNIFIABLE DAMAGE GIVING RISE TO ANY SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF (IN WHOLE OR IN PART) THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, OTHER FAULT OR THE VIOLATION OF LAW, IN EACH CASE, OF OR BY ANY SUCH INDEMNIFIED PERSON. BUYER AND SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.

Section 10.7 Waiver of Right to Rescission . SELLER AND BUYER ACKNOWLEDGE THAT THE PAYMENT OF MONEY, AS LIMITED BY THE TERMS OF THIS AGREEMENT, SHALL BE ADEQUATE COMPENSATION FOR BREACH OF ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT CONTAINED HEREIN OR FOR ANY OTHER CLAIM ARISING IN CONNECTION WITH OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT. AS THE PAYMENT OF MONEY

SHALL BE ADEQUATE COMPENSATION, BUYER AND SELLER WAIVE ANY RIGHT TO RESCIND THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY FOLLOWING THE CLOSING.

Section 10.8 Exclusive Remedy .

(a) Other than for instances of fraud and without limiting any recourse pursuant to the terms of the Company Agreement, the Parties hereby acknowledge and agree that the indemnification provisions and remedies set forth in this Article X shall, from and after the Closing, constitute the sole and exclusive remedies of the Parties with respect to this Agreement and the transactions contemplated hereby and the Parties acknowledge and agree that the remedies available in this Article X supersede any other remedies available at Law or in equity.

(b) Notwithstanding anything in this Agreement to the contrary, (i) no Representative or Affiliate of Seller (nor any Representative of any such Affiliate or any Person directly or indirectly owning any interest in Seller) shall have any liability to Buyer or any other Person as a result of the breach of any representation, warranty, covenant, agreement or obligation of Seller in this Agreement or in any certificate delivered pursuant to this Agreement, and (ii) no Representative or Affiliate of Buyer (nor any Representative of any such Affiliate or any Person directly or indirectly owning any interest in Buyer) shall have any liability to Seller or any other Person as a result of the breach of any representation, warranty, covenant, agreement or obligation of Buyer in this Agreement or in any certificate delivered pursuant to this Agreement.

Section 10.9 Non-Compensatory Damages . None of the Buyer Indemnified Parties or Seller Indemnified Parties shall be entitled to recover from any other Party, or their respective Affiliates, any indirect, special, incidental, consequential, punitive, exemplary, remote or speculative damages or damages for lost profits of any kind to the extent not constituting actual or direct damages arising under or in connection with this Agreement or the transactions contemplated hereby, except to the extent any such Party suffers such damages to a Third Party, which damages (including costs of defense and reasonable attorneys’ fees incurred in connection with defending against such damages) shall not be excluded by this provision as to recovery hereunder. Subject to the preceding sentence, Buyer, on behalf of each of the Buyer Indemnified Parties and Seller, on behalf of each applicable Seller Indemnified Party, waive any right to recover punitive, special, indirect, exemplary, consequential damages, remote or speculative, including damages for lost profits of any kind to the extent not constituting actual or direct damages arising in connection with or with respect to this Agreement or the transactions contemplated hereby.

Section 10.10 Tax Treatment of Payments . Any payments made to any Party pursuant to this Article X shall constitute an adjustment of the Purchase Price for Tax purposes and shall be treated as such by Buyer and Seller on their Tax Returns to the extent permitted by Law.

ARTICLE XI
TERMINATION

Section 11.1 Termination . At any time prior to the Closing, this Agreement may be terminated and the transactions contemplated hereby abandoned:

(a) by the mutual consent of Buyer and Seller as evidenced in writing and signed by each of Buyer and Seller;

(b) by Buyer, (i) by written notice to Seller, if (A) Seller has breached its representations, warranties, covenants or obligations hereunder and such breach would or does result in the failure of any condition expressly set forth in Article IX , and (B) such breach has not been cured within 30 days following written notification to Seller thereof; provided , however , that if, at the end of such 30 day period, Seller is endeavoring in good faith, and proceeding diligently, to cure such breach, Seller shall have an additional 30 days in which to effect such cure, or (ii) if the conditions to the obligations of Seller at the Closing have been satisfied, and Seller fails to close;

(c) by Seller, (i) by written notice to Buyer, if (A) Buyer has breached its representations, warranties, covenants or obligations hereunder and such breach would or does result in the failure of any condition expressly set forth in Article IX , and (B) such breach has not been cured within 30 days following written notification to Buyer thereof; provided , however , that if, at the end of such 30 day period, Buyer is endeavoring in good faith, and proceeding diligently, to cure such breach, Buyer shall have an additional 30 days in which to effect such cure or (ii) if the conditions to the obligations of Buyer at the Closing have been satisfied, and Buyer fails to close;

(d) at any time before the Closing, by either Seller or Buyer, by written notice to the other Party, in the event that any Law or final, non-appealable Order restrains, enjoins or otherwise prohibits or makes illegal the sale of the Transferred Interests pursuant to this Agreement; or

(e) by either Party, at such Party’s option, at any time following two (2) Business Days after the Outside Termination Date;

provided, however , that no Party shall have the right to terminate this Agreement pursuant to subsections (b), (c), (d) or (e) above if such Party or its Affiliates are at such time in material breach of any provision of this Agreement.

Section 11.2 Effect of Termination . If this Agreement is terminated under Section 11.1 , except for the provisions of Article I , Section 10.9 , this Section 11.2 , Section 11.3 , Article XII and Article XIV , this Agreement will terminate and the Parties shall have no liability or obligation to the other Party hereunder, and Seller and its Affiliates shall be free immediately to enjoy all rights of ownership of the interests contemplated to be sold hereunder and to sell, transfer, encumber or otherwise dispose of any such interests or direct or indirect interests in the Company, any Subsidiary or the Assets to any Person without any restriction under this Agreement; provided , however , except to

the extent otherwise provided herein, no Party will be released from liability for any breach of this Agreement accruing prior to such termination. The Confidentiality Agreements shall not be affected by a termination of this Agreement.

(a) If Seller has terminated this Agreement pursuant to Section 11.1(c) , then, upon such termination, as Seller’s sole and exclusive remedy (all other remedies being expressly waived by Seller), Seller shall be entitled to promptly receive from Buyer an amount equal to the Termination Fee as liquidated damages.

(b) If Buyer has terminated this Agreement pursuant to Section 11.1(b) , then Buyer shall have the right to seek any remedy available to it at law on account of the breach by Seller of this Agreement.

(c) The Parties agree that (i) in the event of the termination of this Agreement by Seller pursuant to Section 11.1(c) , Seller’s damages would be uncertain and difficult to quantify, (ii) the amount of liquidated damages specified in Section 11.2(a) is reasonable and considers the actual or anticipated harm that could be caused by the termination of this Agreement due to Buyer’s breach, the difficulty of proving the loss arising from any such breach and the difficulty of finding another, adequate remedy at law, and (iii) the liquidated damages payment specified in Section 11.2(a) is structured to function as damages arising from the termination of this Agreement due to Buyer’s breach and not as a penalty.

Section 11.3 Return of Documentation and Confidentiality . Upon termination of this Agreement, Buyer, at its sole option, shall return to Seller or shall destroy all title, engineering, environmental assessments or reports, maps and other information furnished by or on behalf of Seller to Buyer or prepared by or on behalf of Buyer in connection with its due diligence investigation of the Assets, in each case, in accordance with the Confidentiality Agreements (and subject to such retention rights as are provided in the Confidentiality Agreements) and an officer of Buyer shall certify same to Seller in writing.

ARTICLE XII
DISCLAIMERS

Section 12.1 Disclaimer - Representations and Warranties . BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN ARTICLE IV AND ARTICLE V AND IN ANY TRANSACTION DOCUMENT, (A) NEITHER SELLER NOR ANY OF SELLER’S AFFILIATES MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY, IMPLIED, WRITTEN, ORAL OR OTHERWISE AND (B) SELLER, FOR ITSELF AND ITS AFFILIATES, HEREBY EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES, EXPRESS, STATUTORY, IMPLIED, WRITTEN, ORAL OR OTHERWISE, INCLUDING ANY REPRESENTATION OR WARRANTY REGARDING: (I) TITLE, (II) ANY COSTS, EXPENSES, REVENUES, RECEIPTS, ACCOUNTS RECEIVABLE OR ACCOUNTS PAYABLE, (III) ANY CONTRACTUAL, ECONOMIC OR FINANCIAL

INFORMATION AND DATA ASSOCIATED WITH THE COMPANY OR ANY SUBSIDIARY, (IV) THE CONTINUED FINANCIAL VIABILITY OR PRODUCTIVITY OF THE ASSETS OR TRANSPORTABILITY OF ANY PRODUCT IN CONNECTION THEREWITH, (V) THE ENVIRONMENTAL OR PHYSICAL CONDITION OF THE ASSETS OR ANY ENVIRONMENTAL LIABILITY, (VI) ANY FEDERAL, STATE, LOCAL OR TRIBAL INCOME OR OTHER TAX CONSEQUENCES ASSOCIATED WITH THE ASSETS OR THE MEMBERSHIP INTERESTS, (VII) THE ABSENCE OF PATENT OR LATENT DEFECTS, (VIII) THE STATE OF REPAIR OF THE ASSETS, (IX) MERCHANTABILITY OR CONFORMITY TO MODELS, (X) ANY RIGHTS OF ANY MEMBER OF THE BUYER INDEMNIFIED PARTIES UNDER APPROPRIATE LAWS TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, (XI) FREEDOM FROM PATENTS, COPYRIGHT OR TRADEMARK INFRINGEMENT, (XII) FITNESS FOR A PARTICULAR PURPOSE, AND (XIII) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES OR DECLINE RATES WITH RESPECT TO ANY OF THE PROPERTIES UPSTREAM OF THE APPLICABLE FACILITIES, OR THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY, UPSTREAM OF THE APPLICABLE FACILITIES.

EXCEPT THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED IN ARTICLE IV AND ARTICLE V AND IN ANY TRANSACTION DOCUMENT, THE TRANSFERRED INTERESTS (AND THE INDIRECT TRANSFER OF AN INTEREST IN THE ASSETS RESULTING THEREFROM) ARE BEING TRANSFERRED “AS IS, WHERE IS, WITH ALL FAULTS,” AND SELLER AND ITS AFFILIATES AND THEIR RESPECTIVE REPRESENTATIVES EXPRESSLY DISCLAIM, AND BUYER AND ITS AFFILIATES AND ITS REPRESENTATIVES EXPRESSLY DISCLAIM RELIANCE UPON, ANY OTHER REPRESENTATIONS OR WARRANTIES, OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY REPRESENTATIONS OR WARRANTIES AS TO THE CONDITION, VALUE OR QUALITY OF THE COMPANY, ANY SUBSIDIARY AND THE ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS AND OTHER INCIDENTS OF THE COMPANY, THE SUBSIDIARIES AND THE ASSETS.

Section 12.2 Disclaimer - Statements and Information . SELLER, FOR ITSELF AND ITS AFFILIATES, EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES, EXCEPT TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN ARTICLE IV AND ARTICLE V AND IN ANY TRANSACTION DOCUMENT, ASSOCIATED WITH THE QUALITY, ACCURACY, COMPLETENESS OR MATERIALITY OF THE INFORMATION, DATA AND MATERIALS FURNISHED (WHETHER ELECTRONICALLY, ORALLY, BY VIDEO, IN WRITING OR ANY OTHER MEDIUM, BY COMPACT DISC, IN THE DATA ROOM OR OTHERWISE) AT ANY TIME TO THE BUYER INDEMNIFIED PARTIES ASSOCIATED WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ALL OF WHICH HAS BEEN FURNISHED SOLELY AS AN ACCOMMODATION, INCLUDING, INFORMATION, DATA OR MATERIALS

REGARDING: (A) TITLE TO THE ASSETS, (B) COSTS, EXPENSES, REVENUES, RECEIPTS, ACCOUNTS RECEIVABLE OR ACCOUNTS PAYABLE ASSOCIATED WITH THE ASSETS, (C) CONTRACTUAL, ECONOMIC OR FINANCIAL INFORMATION ASSOCIATED WITH THE ASSETS, (D) ANY PROJECTIONS, FORECASTS, BUSINESS PLANS OR BUDGET INFORMATION, (E) THE CONTINUED FINANCIAL VIABILITY OR PRODUCTIVITY OF THE ASSETS OR TRANSPORTABILITY OF PRODUCT, (F) THE ENVIRONMENTAL OR PHYSICAL CONDITION OF THE ASSETS OR ANY ENVIRONMENTAL LIABILITY, (G) FEDERAL, STATE, LOCAL OR TRIBAL INCOME OR OTHER TAX CONSEQUENCES ASSOCIATED WITH THE ASSETS, (H) THE ABSENCE OF PATENT OR LATENT DEFECTS, (I) THE STATE OF REPAIR OF THE ASSETS, (J) ANY WARRANTY REGARDING MERCHANTABILITY OR CONFORMITY TO MODELS, (K) ANY RIGHTS OF ANY MEMBER OF THE BUYER INDEMNIFIED PARTIES UNDER APPROPRIATE LAWS TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, (L) ANY WARRANTY OF FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, (M) WARRANTIES EXISTING UNDER LAW NOW OR HEREAFTER IN EFFECT, (N) ANY WARRANTY REGARDING FITNESS FOR A PARTICULAR PURPOSE, AND (O) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES OR DECLINE RATES WITH RESPECT TO ANY OF THE PROPERTIES UPSTREAM OF THE APPLICABLE FACILITIES, OR THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY, UPSTREAM OF THE APPLICABLE FACILITIES.

ARTICLE XIII
TAX MATTERS

Section 13.1 Liability for Transfer Taxes . The Parties do not anticipate that any transfer, sales, use, value added, excise, filing, recording, documentary, stamp or other similar Taxes will arise as a result of the consummation of the transactions contemplated by this Agreement (“ Transfer Taxes ”). Notwithstanding the foregoing, if any Transfer Taxes arise as a result of the consummation of the transactions contemplated by this Agreement, the payment of any and all such Transfer Taxes shall be borne by Buyer. The Parties agree to cooperate fully with each other to minimize any such liability for Transfer Taxes to the extent legally permissible, and the Parties shall cooperate in the preparation, execution and filing of all Tax Returns regarding any Transfer Taxes that become payable in connection with the transactions contemplated by this Agreement.

Section 13.2 Company Tax Returns . With respect to Tax Returns required to be filed by or with respect to the Company or the Subsidiaries (“ Company Returns ”), Seller shall cause the Company to prepare all such Company Returns that are required to be filed prior to the Closing Date and shall cause the Company (or applicable Subsidiary) to pay all Taxes shown to be due on such Tax Returns. The Company shall prepare all Company Returns that are required to be filed on or after the Closing Date

and shall pay or cause the Company (or applicable Subsidiary) to pay all Taxes shown to be due on such Tax Returns.

Section 13.3 Cooperation on Tax Matters . In connection with the preparation of Company Returns, payment of Taxes related to the Company, audit examinations related to the Company, and any administrative or judicial proceedings regarding Tax liabilities that are imposed on Seller or Buyer and related to the Company, Buyer and Seller shall, and shall cause the Company to, cooperate fully with each other, including with respect to the furnishing or making available during normal business hours of records, personnel (as reasonably required), books of account, powers of attorney or other materials necessary or helpful for the preparation of such Company Returns, the payment of such Taxes, the conduct of such audit examinations or the defense of claims by Governmental Authorities as to the imposition of such Taxes.

Section 13.4 Straddle Period . The portion of Taxes attributable to a Straddle Period that are allocated to the portion of the period ending on the Closing Date shall be determined as follows:

(a) In the case of any real property, personal property, ad valorem and similar Taxes (collectively, “ Property Taxes ”), the amount of such Property Taxes attributable to the portion of the period ending on and including the Closing Date shall be deemed to be the amount of such Property Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days in the Straddle Period ending on and including the Closing Date and the denominator of which is the number of days in the entire Straddle Tax Period; and

(b) In the case of any Taxes based upon or related to income, sales, revenue, receipts, payroll or similar items, or imposed in connection with any sale or other transfer or assignment of property (real or personal, tangible or intangible) or other Taxes not described in Section 13.4(a) , but specifically excluding any Taxes described in Section 13.1 the amount of any such Taxes that are attributable to the portion of the period ending on and including the Closing Date shall be determined based on an interim closing of the books.

Section 13.5 Tax Classification Elections . Seller shall not, and shall not permit any Company or any other Person to, file or make any election to have the Company or any Subsidiary classified as an association taxable as a corporation for U.S. federal income tax purposes (or state, local, or foreign income Tax purposes where applicable).

Section 13.6 754 Election . If a Development Company does not have in effect an election under Section 754 of the Code relating to the adjustment of the tax bases of its assets as provided in Sections 734 and 743 of the Code (a “ Section 754 Election ”) that would be applicable for the Tax year of such Development Company that includes the Closing Date, Seller shall cause such Development Company to make a Section 754 Election on its U.S. federal income tax return for the Tax year of such Development Company that includes the Closing Date.

Section 13.7 Intended Tax Treatment . As a result of the Company and each of the Holding Companies being disregarded as entities separate from Seller and each of the Development Companies being treated as a partnership for U.S. federal income tax purposes immediately prior to the consummation of the transactions contemplated by this Agreement, the Parties agree to report on their U.S. federal income Tax Returns (and applicable state and local Tax Returns) the sale and purchase of the Transferred Interests as a transaction described in Rev. Rul. 99-5 (Situation 1), 1999-1 CB 434, with (a) Buyer being treated as purchasing from Seller, and Seller being treated as selling to Buyer, 49% of the partnership interest in each Development Company, and immediately thereafter, (b) Buyer and Seller being treated as contributing their respective shares of the partnership interest in each Development Company to the Company in exchange for partnership interest in the Company, with the Company’s classification changing from an entity that is disregarded as separate from Seller to a partnership.

Section 13.8 Allocation of Purchase Price . Buyer and Seller shall use commercially reasonable efforts to agree to an allocation among the assets of each of the Development Companies in accordance with Treasury Regulation Section 1.755-1(a)(2) within sixty (60) days after the Closing Date. If Seller and Buyer reach an agreement with respect to the allocation, (i) Buyer and Seller shall use commercially reasonable efforts to update such allocation following any adjustment to the Purchase Price pursuant to this Agreement, (ii) Buyer and Seller shall cause each Development Company to use such allocation for purposes of Section 755 and the Treasury Regulations promulgated thereunder, and (iii) Buyer and Seller shall, and shall cause their Affiliates to, report consistently with the allocation, as adjusted, on all Tax Returns (including, but not limited to, the statements required to be filed under Treasury Regulations Sections 1.743-1(k) and 1.751-1(a)(3)), and neither Seller nor Buyer shall take any position on any Tax Return that is inconsistent with the allocation, as adjusted, unless otherwise required by applicable Laws; provided , however , that no Party shall be unreasonably impeded in its ability and discretion to negotiate, compromise, and/or settle any Tax audit, claim, or similar proceedings in connection with such allocation.

ARTICLE XIV
MISCELLANEOUS

Section 14.1 Notices . Except as expressly set forth to the contrary in this Agreement, all notices, requests or consents provided for or permitted to be given under this Agreement must be in writing and will be deemed to be received: (a) if mailed by registered or certified mail, return receipt requested, on the day such notice is received, and if such day is not a Business Day, on the next subsequent Business Day; (b) if sent by overnight courier, one Business Day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, (c) if personally delivered, on the date of receipt of such delivery. All notices, requests and consents shall be sent as follows:

If to Seller, to:

Bakken Holdings Company LLC

1300 Main Street

Houston, TX 77002

Attention: General Counsel

with copies to:

Porter Hedges LLP

1000 Main Street, 35th Floor

Houston, TX 77002

Attention: Robert H. Thomas

If to Buyer, to:

MarEn Bakken Company LLC

c/o Enbridge Holdings (DakTex) L.L.C.

1100 Louisiana, Suite 3300

Houston, Texas 77002

Attn: Director, Merchant Terminals, Rail and M&A

With a copy to :

MarEn Bakken Company LLC

c/o Enbridge Holdings (DakTex) L.L.C.

1100 Louisiana, Suite 3300

Houston, Texas 77002

Attn: Director, US Law – Liquids

and

MarEn Bakken Company LLC

c/o Marathon Petroleum Corporation

539 South Main Street

Findlay, Ohio 45840

Attn: General Counsel

Each Party may change its address by notifying the other Party in writing of such address change.

Section 14.2 Succession and Assignment . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. No Party may assign this Agreement or any rights, interest, obligations or other parts hereof without the prior written consent of the other Party, which consent and

approval may be denied in such other Party’s sole discretion. Any assignment in violation of this Section 14.2 shall be void.

Section 14.3 Rights of Third Parties . Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer upon any Person other than the Parties or their successors and permitted assigns, or the Parties’ respective related Indemnified Parties hereunder any rights, remedies, obligations or liabilities under or by reason of this Agreement; provided that only a Party and its respective successors and permitted assigns will have the right to enforce the provisions of this Agreement on its own behalf or on behalf of any of its related Indemnified Parties (but shall not be obligated to do so).

Section 14.4 Expenses . Except as otherwise expressly provided herein, each Party shall bear its own costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby whether or not such transactions shall be consummated, including all fees of its legal counsel, financial advisers and accountants.

Section 14.5 Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any facsimile or other electronic copies hereof or signature hereon shall, for all purposes, be deemed originals.

Section 14.6 Entire Agreement . This Agreement (together with the Appendixes, Exhibits and Schedules hereto), the Transaction Documents and the Confidentiality Agreements, constitute the entire agreement among the Parties and supersede any other agreements or representations, whether written or oral, that may have been made or entered into by or among any of the Parties or any of their respective Affiliates relating in any way to the transactions contemplated hereby or the subject matter of this Agreement.

Section 14.7 No Partnership . Except to the extent contemplated by the Company Agreement, this Agreement does not give rise now or in the future to an agency or partnership relationship among Seller and its Affiliates, on one hand, and Buyer and its Affiliates, on the other hand. Except to the extent contemplated by the Company Agreement, it is not the intention of the Parties to form, and nothing in this Agreement shall be construed as forming, a partnership or joint venture among Buyer and Seller. Except to the extent contemplated by the Company Agreement, each Party agrees that Seller, on one hand, and Buyer, on the other hand, have not been, are not and will not be a fiduciary, partner or joint venturer to the other or to any of Buyer’s or Seller’s Affiliates, as applicable, and each Party agrees not to assert that Seller, on one hand, and Buyer, on the other hand, have ever acted as a fiduciary with respect to any aspect of the activities contemplated here. Each Party agrees not to assert that it did not understand this Agreement, that it mistakenly signed it, that it signed under duress or coercion, that it lacks mental or other capacity, that one Party has discriminated against the other Party in any way or that it has made any representations or has any understanding or agreement

other than as set forth in this Agreement, which fully recites all agreements the Parties have.

Section 14.8 Amendments . This Agreement may be amended or modified in whole or in part, and terms and conditions may be waived, only by a duly authorized agreement in writing which makes reference to this Agreement executed by all of the Parties.

Section 14.9 Publicity . All press releases or other public communications of any nature whatsoever relating to the transactions contemplated by this Agreement, and the method of the release for publication thereof, shall be subject to the prior written consent of Buyer and Seller, which consent shall not be unreasonably withheld, conditioned or delayed by such Party; provided, however , that nothing herein shall prevent a Party from publishing such press releases or other public communications as is necessary to satisfy such Party’s obligations at Law or under the applicable rules of any stock or commodities exchange after consultation with the other Party and such other Party’s reasonable review and comment.

Section 14.10 Non-Waiver . No waiver by any Party of any default by the other Party in the performance of any provision, condition or requirement herein shall be deemed to be a waiver of, or in any manner release the other Party from, performance of any other provision, condition or requirement herein, nor shall such waiver be deemed to be a waiver of, or in any manner a release of, the other Party from future performance of the same provision, condition or requirement. Any delay or omission of either Party to exercise any right hereunder shall not impair the exercise of any such right, or any like right, accruing to it thereafter. The failure of either Party to perform its obligations hereunder shall not release the other Party from the performance of such obligations.

Section 14.11 Severability . If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. The Parties further agree that if any provision contained herein is, to any extent, held invalid or unenforceable in any respect under the Laws governing this Agreement, they shall take any actions necessary to render the remaining provisions of this Agreement valid and enforceable to the fullest extent permitted by Law and, to the extent necessary, shall amend or otherwise modify this Agreement to replace any provision contained herein that is held invalid or unenforceable with a valid and enforceable provision giving effect to the intent of the Parties to the greatest extent legally permissible in order that the transactions contemplated herein are consummated as originally contemplated to the fullest extent possible.

Section 14.12 Governing Law; Jurisdiction .

(a) This Agreement and any claim, controversy or dispute arising under or related to this Agreement or the transactions contemplated hereby or the rights, duties and relationship of the Parties, shall be governed by and construed and enforced in accordance with the Laws of the

State of Texas, excluding any conflicts of law, rule or principle that might refer construction of provisions to the Laws of another jurisdiction.

(b) The Parties agree that the appropriate, exclusive and convenient forum for any disputes between any of the Parties hereto arising out of this Agreement, the Transaction Documents (other than disputes arising out of the Company Agreement, which shall be governed by the terms thereof) or the transactions contemplated hereby shall be in any state or federal court in Houston, Texas and each of the Parties irrevocably submits to the jurisdiction of such courts solely in respect of any Proceeding arising out of or related to this Agreement. The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Agreement, the Transaction Documents (other than disputes arising out of the Company Agreement, which shall be governed by the terms thereof) or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts. The Parties further agree, to the extent permitted by Law, that a final and nonappealable judgment against a Party in any action or Proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and amount of such judgment.

(c) To the extent that any Party or any of its Affiliates has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, such Party (on its own behalf and on behalf of its Affiliates) hereby irrevocably (i) waives such immunity in respect of its obligations with respect to this Agreement and (ii) submits to the personal jurisdiction of any court described in Section 14.12(b) .

(d) THE PARTIES AGREE THAT THEY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE TRANSACTION DOCUMENTS (OTHER THAN DISPUTES ARISING OUT OF THE COMPANY AGREEMENT, WHICH SHALL BE GOVERNED BY THE TERMS THEREOF) OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

Section 14.13 Schedules . Seller may, at its option, include in the Schedules items that are not material, and any such inclusion, or any references to dollar amounts, shall not be deemed to be an acknowledgment or representation that such items are material, to establish any standard of materiality or to define further the meaning of such terms for purposes of this Agreement. The Schedules hereto are qualified in their entirety by reference to specific provisions of the Agreement, and are not intended to constitute, and shall not be construed as constituting, representations or warranties of Seller except to the extent expressly provided in the Agreement. Matters reflected in the Schedules are not necessarily limited to matters required by the Agreement to be reflected in the Schedules. To the extent any such additional matters are included, they are included for informational purposes and do not necessarily include other matters of a similar nature. Neither the specification of any Dollar amount in the representations and warranties

contained in the Agreement nor the inclusion of any specific item in any Schedule hereto is intended to imply that such amounts (or any higher or lower amounts), or the items so included in such Schedule (or any other items), in each case, are or are not material or within or outside the Ordinary Course of Business.

[signature page follows]

IN WITNESS WHEREOF this Agreement has been duly executed and delivered by each Party as of the date first above written.

SELLER:

BAKKEN HOLDINGS COMPANY LLC

By: /s/ Kelcy L. Warren

Kelcy L. Warren

Chief Executive Officer

BUYER:

MAREN BAKKEN COMPANY LLC

By: /s/ Mark A. Maki

Mark A. Maki

President

Signature Page
Membership Interest Purchase Agreement

APPENDIX I

DEFINITIONS

“ Acquisition Proposal ” has the meaning provided such term in Section 7.7 .

“ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with, such specified Person through one or more intermediaries or otherwise.

“ Agreement ” has the meaning provided such term in the preamble.

“ Applicable Contracts ” means all Contracts to which the Company or any Subsidiary is a party or by which the Assets or any other assets of the Company or any Subsidiary is subject or bound, including all transportation and marketing agreements; hydrocarbon storage agreements; operating agreements; balancing agreements; facilities or equipment leases; interconnection agreements; service and parts agreements; and other similar contracts and agreements held by the Company or any Subsidiary and relating to the Assets or any other assets of the Company or any Subsidiary or by which any such assets are bound.

“ Applicable Facilities ” has the meaning, with respect to each Development Company, provided in the CMA to which such Development Company is a party.

“ Assets ” means all of the right, title and interest of:

(a) the applicable Development Company in and to the following:

(i) The Applicable Facilities, in each case, including all equipment, machinery, fixtures, inventory and supplies and other real, personal and mixed property, operational or nonoperational, primarily used or held for use in connection with the Applicable Facilities, and including all pumps, pipes, spare parts, valves, meters, motors, traps, cathodic protection units, structures and materials used or held for use in connection with the Applicable Facilities (the “ Personal Property ”);

(ii) all Real Property Interests primarily used or held for use in connection with, the Applicable Facilities; and

(iii) all Permits relating in any way to the Applicable Facilities; and

(b) Dakota Truck and EGCA, as applicable, in and to all assets, including all Personal Property, Real Property Interests and Permits, of such Person.

“ Assignment ” means that certain assignment of membership interest, to be entered into at Closing by Seller and Buyer, substantially in the form of Exhibit A .

“ Balance Sheet ” means the unaudited consolidated balance sheet of the Company as of the Balance Sheet Date.

Appendix I

“ Balance Sheet Date ” means June 30, 2016.

“ Benefit Plan ” means each (a) “employee benefit plan,” as such term is defined in Section 3(3) of ERISA (whether or not the plan is subject to ERISA), (b) incentive compensation, bonus or deferred compensation plan or arrangement, (c) employment, consulting, severance or change in control plan, arrangement or policy, (d) vacation practice or other paid-time off program and (e) each other employee benefit, fringe benefit or compensation plan, arrangement, policy or commitment.

“ Business Day ” means any day that is not a Saturday, Sunday or legal holiday in the State of Texas and that is not otherwise a federal holiday in the United States.

“ Buyer ” has the meaning provided such term in the preamble.

“ Buyer Indemnified Parties ” has the meaning provided such term in Section 10.2(a) .

“ Buyer Parent Guaranties ” means (i) that certain guaranty agreement entered into at Closing from Enbridge Energy Partners, L.P., in favor of Seller and the Company, in respect of an undivided seventy-five percent (75%) of Buyer’s obligations under the Company Agreement and (ii) that certain guaranty agreement entered into at Closing from Marathon Petroleum Corporation, in favor of Seller and the Company, in respect of an undivided twenty-five percent (25%) of Buyer’s obligations under the Company Agreement, each substantially in the form of Exhibit D .

“ Claim Notice ” has the meaning provided such term in Section 10.5(a) .

“ Closing ” has the meaning provided such term in Section 9.1 .

“ Closing Date ” has the meaning provided such term in Section 9.1 .

“ CMAs ” means (a) that certain Construction Management Agreement, dated as of October 15, 2014, between Dakota Access and the Construction Manager and (b) that certain Construction Management Agreement, dated as of October 15, 2014, between ETCO and the Construction Manager.

“ Code ” means the Internal Revenue Code of 1986, as it may have been and may be amended from time to time.

“ Company ” has the meaning provided such term in the Recitals.

“ Company Agreement ” means that certain amended and restated limited liability company agreement of the Company, to be entered into at Closing by Seller and Buyer, substantially in the form of Exhibit B .

“ Company Returns ” has the meaning provided such term in Section 13.2 .

“ Confidentiality Agreements ” means that certain (a) Confidentiality Agreement dated March 29, 2016, by and between Enbridge Energy Company, Inc. and Seller, and (b) Confidentiality

Appendix I

Agreement dated February 10, 2016, by and between Marathon Petroleum Company L.P. and Seller, as amended.

“ Consent ” means any consent to assign, approval, filing, waiver, authorization, notice or similar restriction held by a Governmental Authority or other Third Party that is applicable to the transactions contemplated hereby.

“ Consolidated Group ” means any affiliated, combined, consolidated, unitary, or similar group with respect to any Taxes, including any affiliated group within the meaning of Section 1504 of the Code electing to file consolidated federal income Tax Returns and any similar group under foreign, state, or local Law.

“ Construction Manager ” means DAPL-ETCO Construction Management, LLC, a Delaware limited liability company.

“ Contract ” means any written or oral contract, agreement, purchase order, binding bid, commitment or any other legally binding arrangement, but excluding, however, any lease, deed, easement, Permit or other instrument (other than acquisition or similar sales or purchase agreements) creating, assigning or evidencing an interest in any real property (including any Real Property Interest) related to or used in connection with the assets of the Company or any Subsidiary.

“ Control ” means, where used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “ Controlling ” and “ Controlled ” have correlative meanings.

“ Customary Post-Closing Consents ” means the consents and approvals from Governmental Authorities for assignment that are customarily obtained in transactions of this nature after assignment of properties or membership interests.

“ Dakota Access ” has the meaning provided such term in the Recitals.

“ Dakota Access Holdings ” has the meaning provided such term in the Recitals.

“ Dakota Truck ” has the meaning provided to such term in the Recitals.

“ Damages ” means all Proceedings, claims, demands, awards, damages, penalties, fines, costs, liabilities, losses, expenses, Taxes and fees (whether criminal, civil, commercial or related to claims for personal injury or death or property damage and whether accrued or unaccrued or liquidated or unliquidated), including court costs and attorneys’ and experts’ fees and expenses.

“ Data Room ” means the online e-data room established by Seller and any files, records, information and documents otherwise furnished by Seller to Buyer or its Representatives in connection with the transactions contemplate hereby.

“ Deductible ” has the meaning provided such term in Section 10.4(a) .

Appendix I

“ Development Company ” or “ Development Companies ” has the meaning provided such term in the Recitals.

“ Development Company Agreements ” means (a) the Amended and Restated Limited Liability Company Agreement of Dakota Access dated October 15, 2014 and (b) the Amended and Restated Limited Liability Company Agreement of ETCO dated October 15, 2014.

“ Direct Claim ” has the meaning provided such term in Section 10.5(c) .

“ Dollars ” and “ $ ” mean the lawful currency of the United States of America.

“ Emergency Operations ” means operations necessary to respond to or alleviate the eminent or immediate endangerment of (a) the health or safety of any Person or the environment or (b) the safety or operational condition of any of the assets of the Company or the Subsidiaries, including the Assets.

“ EGCA ” has the meaning provided to such term in the Recitals.

“ Environmental Law ” means any and all Laws in effect as of the Execution Date pertaining to or regulating pollution, environmental protection, natural resource damages, conservation of resources, wildlife, waste management, or the use, storage, generation, production, treatment, emission, discharge, release, remediation, removal, disposal, or transport of Hazardous Substances, including: the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Federal Water Pollution Control Act (which includes the Federal Clean Water Act), the Federal Clean Air Act, the Federal Solid Waste Disposal Act (which includes the Resource Conservation and Recovery Act), the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Safe Drinking Water Act of 1974, the Emergency Planning and Community Right-to-Know Act of 1986, the Occupational Safety and Health Act of 1970, the Hazardous Liquid Pipeline Safety Act, the Oil Pollution Act of 1990, and the Pipeline Safety Improvement Act of 2002, and similar state laws and common laws, each as amended.

“ Environmental Liabilities ” means any and all environmental response costs (including costs of investigation, removal and remediation), damages, natural resource damages, settlements, consulting fees, expenses, penalties, fines, orphan share, prejudgment and post-judgment interest, court costs, attorneys’ fees and other liabilities incurred, imposed under or related to Environmental Laws, including liabilities imposed or incurred (i) pursuant to any order, notice of responsibility, directive or obligation (including requirements embodied in Environmental Laws), injunction, judgment or similar act (including settlements) by any Governmental Authority or court of competent jurisdiction under, any Environmental Laws or (ii) pursuant to any claim or cause of action by a Governmental Authority or other Person for personal injury, property damage, damage to natural resources, remediation or response costs to the extent arising out of any violation of, or any remediation obligation under, any Environmental Laws.

“ Environmental Permits ” means all Permits of Governmental Authorities issued pursuant to or required by Environmental Laws and necessary for or held in connection with the ownership,

Appendix I

construction, operation or maintenance of the assets of the Company and the Subsidiaries, including the Assets.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ ETCO ” has the meaning provided such term in the Recitals.

“ ETCO Holdings ” has the meaning provided such term in the Recitals.

“ Execution Date ” has the meaning provided such term in the preamble.

“ Fundamental Representations ” has the meaning provided such term in Section 10.1(a) .

“ GAAP ” means generally accepted accounting principles of the United States, consistently applied.

“ Governmental Authority ” means any federal, state, county, municipal or local government or any regulatory or administrative agency, authority, board, department, division, commission, court or arbitral body, or other similar recognized organization or body of any federal, state, tribal, municipal, or local governmental authority or of any foreign government or other similar recognized organization or body exercising similar powers or authority.

“ Hazardous Substances ” means any substance, waste, or material that is required under Environmental Laws or defined, designated, or listed as a “hazardous substance,” “solid waste,” “hazardous waste,” “hazardous material,” “pollutant,” “contaminant,” “toxic substance” or similar term under Environmental Laws.

“ Holding Company ” or “ Holding Companies ” has the meaning provided such term in the Recitals.

“ Indebtedness ” of any Person means, without duplication, (a) the principal of and, accrued and unpaid interest, prepayment premiums or penalties and fees and expenses in respect of indebtedness of such Person for borrowed money; (b) all obligations (contingent or otherwise) of such Person issued or assumed as the deferred purchase price of property or services, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable incurred in the ordinary and usual course of business of normal day-to-day operations of the business consistent with past practice); (c) all capitalized lease obligations; (d) any off-balance sheet financing of such Person; (e) all other obligations of a Person which would be required to be shown as indebtedness on a balance sheet of such Person prepared in accordance with GAAP; (f) all obligations of the type referred to in clauses (a) through (e) of any Persons the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise; and (g) all obligations of the type referred to in clauses (a) through (f) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person).

“ Indemnified Party ” has the meaning provided such term in Section 10.5(a) .

Appendix I

“ Indemnifying Party ” has the meaning provided such term in Section 10.5(a) .

“ Indemnity Claim Threshold ” has the meaning provided such term in Section 10.4(a) .

“ Interest ” means, with respect to any Person, (a) capital stock, member interests, partnership interests, other equity interests, rights to profits or revenue and any other similar interest of such Person, (b) any security or other interest convertible into or exchangeable or exercisable for any of the foregoing, and (c) any right (contingent or otherwise) to acquire any of the foregoing.

“ Knowledge ” means, with respect to Seller, the actual knowledge of the persons identified on Schedule 1.1(a) without investigation and, with respect to Buyer, the actual knowledge of the persons identified on Schedule 1.1(b) without investigation.

“ Law ” means any applicable statute, writ, law, common law, rule, regulation, ordinance, code (including the Code), Order, or determination of a Governmental Authority, or any requirement under the common law.

“ Lien ” means any liens, pledges, mortgages, deeds of trust, security interests, leases, licenses, charges, claims, encroachments, easements or other encumbrances of any kind.

“ LLC Agreement ” means the Limited Liability Company Agreement of the Company dated as of July 26, 2016.

“ Loans ” has the meaning provided such term in the Senior Secured Credit Facility.

“ Material Adverse Effect ” means (a) a circumstance, change, effect or event that is or could be reasonably expected to become, individually or in the aggregate with all other circumstances, changes, effects or events, materially adverse to the ownership, use, condition (including financial condition) or operations (including results of operation), of or related to the Company, the Subsidiaries and their respective assets, including the Assets, taken as a whole, or (b) a circumstance, change, effect or event that individually or in the aggregate with all other circumstances, changes, effects or events prevents or materially impedes the ability of Seller to consummate the transactions contemplated by this Agreement and the Transaction Documents, and to perform its obligations hereunder and thereunder; excluding, in each case, any such circumstance, change, effect or event resulting from or related to (i) changes or conditions affecting the oil and gas industries generally (including changes in hydrocarbon pricing and the depletion of reserves), (ii) changes in the financial, banking, credit, securities or capital markets (including any suspension of trading in, or limitation on prices for, securities on any stock exchange or any changes in interest rates) or any change in the general national or regional economic or financial conditions, (iii) changes in economic (including credit markets), regulatory, social or political conditions generally, (iv) changes in Law, (v) conditions caused by acts of terrorism or war (whether or not declared) or any manmade disaster or acts of God, (vi) any effects of weather, geological or meteorological events or other natural disaster; (vii) any change caused by the pending sale of the Transferred Interests to Buyer, including changes due to the credit rating of Buyer; (viii) any changes in the costs of commodities or supplies; (ix) any change in any market that is downstream of the outlet flange of any of the Assets; (x) any decrease in inlet volumes into the Applicable Facilities or any curtailment in transportation volumes

Appendix I

of the Applicable Facilities that are not directly related to any breach of any agreement by Seller or its Affiliates; (xi) any failure, in and of itself, by the Company or any Subsidiary to meet internal or published projections, schedules, forecasts, estimates or plans in respect of financial, development or operating metrics for any period; or (xii) conditions or effects resulting from the announcement of the existence of this Agreement.

“ Material Contract ” has the meaning provided such term in Section 5.4(a) .

“ Membership Interests ” has the meaning provided such term in the Recitals.

“ Operator ” means DAPL-ETCO Operations Management, LLC, a Delaware limited liability company.

“ Operating Agreements ” means (a) that certain Operating Agreement, dated as of October 15, 2014, between Dakota Access and the Operator and (b) that certain Operating Agreement, dated as of October 15, 2014, between ETCO and the Operator.

“ Order ” means any order, writ, injunction, decree, award, judgment, ruling, compliance or consent order or decree, settlement agreement, or similar binding legal agreement issued by or entered into with a Governmental Authority.

“ Ordinary Course of Business ” means the ordinary conduct of the Company’s and the Subsidiaries’ normal day to day business related to its assets (including the Assets) in a manner consistent with the past practices and customs of the Company and the Subsidiaries.

“ Organizational Documents ” means any charter, certificate of incorporation, articles of association, partnership agreements, limited liability company agreements, bylaws, operating agreements or similar formation or governing documents, instruments or certificates executed, adopted or filed in connection with the creation, formation or organization of a Person, including any amendments thereto.

“ Outside Termination Date ” means December 31, 2016.

“ Party ” or “ Parties ” has the meaning provided such term in the preamble.

“ Permits ” means all permits, licenses, orders, approvals, variances, waivers, franchises, rights, registrations and other authorizations issued by any Governmental Authority.

“ Permitted Liens ” means with respect to any Asset:

(a) Consents and similar contractual provisions affecting such Asset, including the Required Consents and Customary Post-Closing Consents, that are not triggered by the execution of this Agreement or the consummation of the transactions contemplated hereby;

(b) preferential purchase rights and similar contractual provisions affecting such Asset that are not triggered by the execution of this Agreement or the consummation of the transactions contemplated hereby;

Appendix I

(d) required notices to and filings with a Governmental Authority in connection with the consummation of the transactions contemplated by this Agreement that constitute Required Consents;

(e) rights reserved to or vested in a Governmental Authority having jurisdiction to control or regulate such Asset in any manner whatsoever that are not violated by current contemplated use of such Asset and all Laws of such Governmental Authorities;

(f) Liens for Taxes that are (i) not yet due and payable or (ii) being contested in good faith by appropriate proceedings and are listed on Schedule 5.6 ;

(g) mechanic’s, materialman’s, carrier’s, repairer’s, vendor’s, warehousemen’s, workmen’s and other similar Liens that are (i) not yet due and payable or (ii) being contested in good faith by appropriate proceedings and are listed on Schedule 1.1(c) ;

(h) rights of use, easements, rights-of-way, Permits, licenses, surface leases, sub-surface leases, grazing rights, logging rights, ponds, lakes, waterways, canals, ditches, reservoirs, equipment, pipelines, utility lines, railways, streets, roads and structures on, over or through such Asset, in each case, to the extent the same do not materially affect or impair the ownership, operation or use of such Asset (either as currently owned, operated or used, or as contemplated to be owned, operated or used in accordance with all plans relating to the Applicable Facility);

(i) any undetermined or inchoate liens or charges constituting or securing the payment of expenses that were incurred incidental to operation or use of such Asset and are not yet due and payable;

(j) the terms and conditions of the instruments creating the Assets;

(k) Liens placed by the owner of the lands underlying the Real Property Interests;

(l) any Lien which is discharged or released by the Company, any Subsidiary or their Affiliates at or prior to Closing

(m) other Liens that do not impair in any material respect the ownership, operation or use of such Asset (as currently owned, operated or used, or as contemplated to be owned, operated or used in accordance with all plans relating to the Applicable Facilities); and

(n) Any matters shown on Schedule 5.9 .

“ Person ” means any individual, firm, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind.

“ Personal Property ” has the meaning provided such term in the definition of Assets.

Appendix I

“ Post-Signing Information ” has the meaning provided such term in Section 7.5 .

“ Pre-Closing Tax Period ” means any Tax period that ends on or before the Closing Date.

“ Proceeding ” means any action, arbitration, audit, cause, complaint, charge, hearing, inquiry, investigation, litigation, proceeding, review or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before any Governmental Authority or arbitrator.

“ Property Taxes ” has the meaning provided such term in Section 13.4(a) .

“ Purchase Price ” has the meaning provided such term in Section 3.1 .

“ Real Property Interests ” means all surface fee interests, surface leases, easements, rights-of-way and other similar surface rights.

“ Records ” means all agreements, documents, maps, books, records, accounts and files relating to the Assets or the business or assets of the Company or any Subsidiary, to the extent (a) in Seller’s or its Affiliates’ (including the Company’s or any Subsidiary’s) possession or (b) to which Seller has the right but are in the possession of a Third Party, including the following: (i) land and title records (including abstracts of title and title opinions), (ii) contract files, (iii) correspondence, (iv) maps, operations, environmental, throughput and accounting records, (v) facility and engineering files, (vi) environmental files, (vii) permitting files, (viii) membership interest registries and minute books of the Company or any Subsidiary and (ix) all Applicable Contracts.

“ Release ” means any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, seeping, dumping, or disposing into the environment.

“ Representatives ” means a Person’s directors, officers, employees, agents or advisors (including attorneys, accountants, auditors, consultants, bankers, financial advisors and any representatives of those advisors)

“ Required Consents ” means all Consents set forth on Schedule 5.3 .

“ Section 754 Election ” has the meaning provided such term in Section 13.6 .

“ Seller ” has the meaning provided such term in the Preamble.

“ Seller Indemnified Parties ” has the meaning provided such term in Section 10.3 .

“ Seller Parent Guaranties ” means (i) that certain guaranty agreement entered into at Closing from Energy Transfer Partners, L.P., in favor of Buyer and the Company, in respect of an undivided sixty percent (60%) of Seller’s obligations under the Company Agreement and (ii) that certain guaranty agreement entered into at Closing from Sunoco Logistics Partners L.P., in favor of Buyer and the Company, in respect of an undivided forty percent (40%) of Seller’s obligations under the Company Agreement, each substantially in the form of Exhibit C .

Appendix I

“ Seller Taxes ” means (a) any and all Taxes (i) imposed on the Company or any Subsidiary for any Pre-Closing Tax Period and for the portion of any Straddle Period ending on and including the Closing Date (as determined in Section 13.4 ); (ii) of any member of any Consolidated Group of which the Company or any Subsidiary is or was a member on or prior to the Closing Date (other than the member of a Consolidated Group comprised solely of two or more of the Company and the Subsidiaries); (iii) resulting from or attributable to (x) a breach of any representation or warranty set forth in Section 5.6 (determined without regard to any materiality or Knowledge qualifier or scheduled item) or (y) a breach by Seller of any covenant relating to Taxes; and (iv) of any other Person for which the Company or any Subsidiary is or has been liable as a transferee or successor, by contract, conversion, merger, or otherwise, in each case pursuant to an event, occurrence or transaction that happens or is entered into prior to the Closing and (b) any payment required to be made by the Company or any Subsidiary to any other member of a Development Company as a result of the consummation of the transactions contemplated by this Agreement resulting in a termination of such Development Company under Section 708 of the Code.

“ Senior Secured Credit Facility ” means that certain Credit and Guaranty Agreement dated as of August 2, 2016 among the Development Companies, Citibank, N.A., as administrative agent on behalf of the lenders, the lenders party thereto, and others, and all other documents executed and delivered by the Company and its Subsidiaries in connection with or as contemplated by such agreement.

“ Straddle Period ” means any Tax period beginning on or before and ending after the Closing Date.

“ Subsidiary ” or “ Subsidiaries ” has the meaning provided such term in the Recitals.

“ Support Instruments ” has the meaning provided such term in Section 5.13 .

“ Tax ” and “ Taxes ” means all taxes, assessments, charges, duties, fees, levies, imposts or other similar charges imposed by a Governmental Authority, including all income, franchise, profits, capital gains, capital stock, transfer, gross receipts, sales, use, transfer, service, occupation, ad valorem, property, excise, severance, windfall profits, premium, stamp, license, payroll, employment, social security, unemployment, disability, environmental, alternative minimum, add-on, value-added, withholding and other taxes, assessments, charges, duties, fees, levies, imposts or other similar charges of any kind, and all estimated taxes, deficiency assessments, additions to tax, penalties and interest.

“ Tax Representations ” has the meaning provided such term in Section 10.1(a) .

“ Tax Return ” means any report, return, election, document, estimated tax filing, declaration or other filing provided to any Governmental Authority including any attachments thereto and amendments thereof.

“ Termination Fee ” means an amount equal to three percent (3%) of the Purchase Price.

Appendix I

“ Third Party ” means any Person other than a Party to this Agreement or an Affiliate of a Party to this Agreement.

“ Third Party Claim ” has the meaning provided such term in Section 10.5(a) .

“ Transaction Documents ” means the Assignment, the Company Agreement and the other documents executed and delivered by the Parties at the Closing in consummation of the transactions contemplated by this Agreement and any other Contract, agreement or document by and among the Parties that is expressly agreed by the Parties to constitute a Transaction Document for purposes of this Agreement.

“ Transactions ” means the transactions contemplated by the Transaction Documents.

“ Transfer Taxes ” has the meaning provided such term in Section 13.1 .

“ Transferred Interests ” has the meaning provided such term in the Recitals.

“ Treasury Regulations ” shall mean the regulations promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code. All references herein to sections of the Treasury Regulations shall include any corresponding provision or provisions of succeeding, similar, substitute, proposed, temporary, or final Treasury Regulations.

“ United States ” means United States of America.

Appendix I

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kelcy L. Warren, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Energy Transfer Partners, L.P.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2016

/s/ Kelcy L. Warren

Kelcy L. Warren

Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas E. Long, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Energy Transfer Partners, L.P.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2016

/s/ Thomas E. Long

Thomas E. Long

Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Energy Transfer Partners, L.P. (the “Partnership”) on Form 10-Q for the quarter ended September 30, 2016 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kelcy L. Warren, Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Date: November 9, 2016

/s/ Kelcy L. Warren

Kelcy L. Warren

Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to and will be retained by Energy Transfer Partners, L.P. and furnished to the Securities and Exchange Commission upon request.

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Energy Transfer Partners, L.P. (the “Partnership”) on Form 10-Q for the quarter ended September 30, 2016 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas E. Long, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Date: November 9, 2016

/s/ Thomas E. Long

Thomas E. Long

Chief Financial Officer