TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
On May 9, 1997, the Partnership paid the first quarter cash distribution
of $0.75 per Unit to Unitholders of record on April 30, 1997. Additionally, on
July 14, 1997, the Partnership declared a cash distribution of $0.80 per Unit
for the quarter ended June 30, 1997, which represents an increase of $0.05 per
Unit in the quarterly distribution. The second quarter distribution is payable
on August 8, 1997, to Unitholders of record on July 31, 1997.
The Company receives incremental incentive distributions of 15%, 25% and
50% on quarterly distributions of Available Cash that exceed $0.55, $0.65 and
$0.90 per Unit, respectively. During the six months ended June 30, 1997 and
1996, incentive distributions paid to the Company totaled $1.4 million and $0.9
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Partnership is involved in various claims and legal proceedings
incidental to its business. In the opinion of management, these claims and
legal proceedings will not have a material adverse effect on the Partnership's
consolidated financial position or results of operations.
The operations of the Partnership are subject to federal, state and local
laws and regulations relating to protection of the environment. Although the
Partnership believes the operations of the pipeline system are in material
compliance with applicable environmental regulations, risks of significant
costs and liabilities are inherent in pipeline operations, and there can be no
assurance that significant costs and liabilities will not be incurred.
Moreover, it is possible that other developments, such as increasingly strict
environmental laws and regulations and enforcement policies thereunder, and
claims for damages to property or persons resulting from the operations of the
pipeline system, could result in substantial costs and liabilities to the
Partnership. The Partnership does not anticipate that changes in environmental
laws and regulations will have a material adverse effect on its financial
position, operations or cash flows in the near term.
The Partnership and the Indiana Department of Environmental Management
(IDEM) have entered into an Agreed Order that will ultimately result in a
remediation program for any on-site and off-site environmental problems
attributable to the Partnership's operations at the Seymour, Indiana, terminal.
As part of the Agreed Order, the Partnership has completed the remedial
investigation sampling for groundwater contamination and has submitted to IDEM
the final remedial investigation report for the Seymour terminal. In the
opinion of the general partner, the completion of the remediation program to be
proposed by the Partnership, if such program is approved by IDEM, will not have
a material adverse impact on the Partnership.
Substantially all of the petroleum products transported and stored by the
Partnership are owned by the Partnership's customers. At June 30, 1997, The
Partnership had approximately 16.9 million barrels of products in its custody
owned by customers. The Partnership is obligated for the transportation,
storage and delivery of such products on behalf of its customers. The
Partnership maintains insurance adequate to cover product losses through
circumstances beyond its control.