What changed in this filing

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Item 1A. Risk Factors

2022-02-23 compared with 2021-02-26 · 82 added, 80 removed, 366 unchanged (31% of the section changed)

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made in this Form 10-K, and may from time to time make in other public filings, press releases, and statements by management, forward-looking statements concerning our operations, economic performance, and financial condition.

We have made in this Form 10-K, and may make in other public filings, press releases, and statements by management, forward-looking statements concerning our operations, economic performance, and financial condition.

These forward-looking statements include statements preceded by, followed by, or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “plans,” “objective,” “should,” or similar expressions or variations on such expressions.

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• our ability to repay debt;

• the resolution of litigation or other disputes;

• conflicts of interest among us, our general partner and its related parties, including Occidental, with respect to, among other things, the allocation of capital and operational and administrative costs, and our future business opportunities;

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• the outcome of pending and future regulatory, legislative, or other proceedings or investigations, and continued or additional disruptions in operations that may occur as we and our customers comply with any regulatory orders or other state or local changes in laws or regulations;

• the economic uncertainty from the worldwide outbreak of COVID-19;

• cyber attacks or security breaches;

• other factors discussed below and elsewhere in this Item 1A, under the caption Critical Accounting Estimates included under Part II, Item 7 of this Form 10-K, and in our other public filings and press releases.

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Further, we are subject to the risk of non-payment or non-performance by Occidental, including with respect to our gathering and transportation agreements.

We cannot predict the extent to which Occidental’s business would be impacted if conditions in the energy industry were to deteriorate further, nor can we estimate the impact such conditions would have on Occidental’s ability to perform under our gathering and transportation agreements.

We cannot predict the extent to which Occidental’s business would be impacted if conditions in the energy industry were to deteriorate, nor can we estimate the impact such conditions would have on Occidental’s ability to perform under our gathering and transportation agreements with Occidental.

Accordingly, any material non-payment or non-performance by Occidental could reduce our ability to make distributions to our unitholders.

Any material limitations to our ability to access capital as a result of adverse changes at Occidental could limit our ability to obtain future financing on favorable terms, or at all, or could result in increased financing costs in the future.

Similarly, material adverse changes at Occidental could impact our unit price adversely, thereby limiting our ability to raise capital through equity issuances or debt financing, or adversely affect our ability to engage in or expand or pursue our business activities, and also prevent us from engaging in certain transactions that might otherwise be considered beneficial to us.

See Occidental’s Exchange Act reports filed with the Securities and Exchange Commission (which are not, and shall not be deemed to be, incorporated by reference herein), for a full discussion of the risks associated with Occidental’s business.

Similarly, material adverse changes at Occidental could adversely impact our unit price, thereby limiting our ability to raise capital through equity issuances or debt financing, or adversely affect our ability to engage in or expand or pursue our business activities, and also prevent us from engaging in certain transactions that might otherwise be considered beneficial to us.

See Occidental’s reports filed under the Securities and Exchange Act of 1934, as amended, with the SEC (which are not, and shall not be deemed to be, incorporated by reference herein), for a full discussion of the risks associated with Occidental’s business.

Occidental’s ownership of our general partner may result in conflicts of interest.

Following the closing of the Occidental Merger, Occidental owns our general partner.

Occidental owns our general partner.

Occidental’s ownership of our general partner may result in conflicts of interest.

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Our future prospects depend on Occidental’s growth strategy, midstream operational philosophy, and drilling program, including the level of drilling and completion activity by Occidental on acreage dedicated to us.

Additional conflicts also may arise in the future associated with future business opportunities that are pursued by Occidental and us.

conflicts also may arise in the future associated with future business opportunities that are pursued by Occidental and us.

For example, Occidental is not prohibited from owning assets or engaging in businesses that directly or indirectly compete with us.

On December 31, 2019, we entered into a set of agreements that will facilitate our ability to operate more independently from Occidental.

Our separation from Occidental entails risks and uncertainties that may have a material adverse effect on our business, financial condition, results of operations, or cash available for distribution to our unitholders.

The difficulties of creating a stand-alone structure include, among other things, implementing operational and administrative technology systems, maintaining effective internal controls, replicating a regulatory compliance infrastructure, and hiring, training and retaining qualified personnel, the loss of which could reduce our competitiveness and prospects for future success.

Attention to such organizational activities could also divert management’s attention from our existing business.

If any of these risks or other unanticipated liabilities or costs were to materialize, then desired benefits from our efforts to become independent from Occidental may not materialize.

Such difficulties may have a material adverse effect on our business, financial condition, results of operations, or cash available for distribution to our unitholders.

Any future credit-rating downgrade could negatively impact our cost of and ability to access capital.

Our costs of borrowing and ability to access the capital markets are affected by market conditions and the credit rating assigned to WES Operating’s debt by the major credit rating agencies.

As of December 31, 2020, WES Operating’s long-term debt was rated “BB” by Standard and Poor’s (“S&P”), “BB” by Fitch Ratings, and “Ba2” by Moody’s Investors Service (“Moody’s”).

As of February 15, 2022, WES Operating’s long-term debt was rated “BBB-” by Standard and Poor’s (“S&P”), BB+ by Fitch Ratings, and “Ba2” by Moody’s Investors Service (“Moody’s”).

In 2020, WES Operating’s credit ratings were downgraded below investment grade by Fitch, S&P, and Moody’s.

As a result of these downgrades, financing costs under the RCF increased.

Additionally, WES Operating currently has $3.4 billion of outstanding senior notes that provide for increased interest rates following downgrade events.

For example, the 2020 downgrades to WES Operating’s credit ratings resulted in a $43.0 million increase to WES Operating’s annualized borrowing costs attributable to the aforementioned senior notes.

Additional downgrades to WES Operating’s credit ratings will further increase its borrowing costs.

Because of these downgrades, financing costs under the RCF increased.

Additionally, WES Operating currently has $3.1 billion of outstanding senior notes that provide for changes to the coupon rates following changes to WES Operating’s credit rating.

Any future downgrades in WES Operating’s credit ratings could adversely affect WES Operating’s ability to issue debt in the public debt markets and negatively impact our cost of capital, future interest costs, and ability to effectively execute aspects of our business strategy.

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In general terms, the prices of natural gas, oil, condensate, NGLs, and other hydrocarbon products fluctuate in response to changes in supply and demand, market uncertainty, and a variety of additional factors that are beyond our control.

For example, market prices for natural gas have declined substantially from the highs achieved in 2008 and have remained depressed for several years.

More recently, the COVID-19 pandemic and resulting mitigation measures also are having an adverse impact on global economic conditions, and are contributing to a significant decline in demand for oil, NGLs, and natural gas, resulting in lower commodity prices that will negatively impact our and our customers’ financial outlooks and activity levels.

For example, market prices for natural gas have declined substantially from the highs achieved in 2008 and have generally remained depressed for several years.

More recently, the COVID-19 pandemic and resulting mitigation measures have had an adverse impact on global economic conditions, and have contributed to significant volatility in demand for oil, NGLs, and natural gas, resulting in extended periods of lower commodity prices that negatively impacted our and our customers’ financial outlooks and activity levels.

Because of the natural decline in production from existing wells, our success depends on our ability to compete for new sources of oil and natural-gas throughput, which is dependent on certain factors beyond our control.

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In addition, our customers, including Occidental, may develop their own midstream systems in lieu of using ours.

While Occidental has dedicated production from certain of its properties to us, we have no control over the level of drilling activity in our areas of operation, the amount of reserves associated with wells connected to our systems, or the rate at which production declines.

While Occidental and other third-party producers have dedicated production from certain of its properties to us, we have no control over the level of drilling activity in our areas of operation, the amount of reserves associated with wells connected to our systems, or the rate at which production declines.

We also have no control over producers or their drilling or production decisions, which are affected by, among other things, the availability and cost of capital, prevailing and projected commodity prices, demand for hydrocarbons, levels of reserves, geological considerations, governmental regulations, the availability of drilling rigs, and other production and development costs.

Sustained reductions in exploration or production activity in our areas of operation would lead to reduced utilization of our gathering, processing, and treating assets.

reductions in exploration or production activity in our areas of operation would lead to reduced utilization of our gathering, processing, and treating assets.

Because of these factors, producers (including Occidental) may be deterred from developing known oil and natural-gas reserves existing in areas served by our assets.

Moreover, Occidental may not develop the acreage it has dedicated to us.

Moreover, Occidental and other third-party producers may not develop the acreage it has dedicated to us.

If competition or reductions in drilling activity result in our inability to maintain the current levels of throughput on our systems, it could reduce our revenue and impair our ability to make cash distributions to our unitholders.

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If a significant percentage of our workforce is unable to work, due to illness or travel or other COVID-19-related restrictions, we may experience significant operational disruptions or inefficiencies and a heightened risk of safety and environmental incidents.

Similarly, we may be impacted by workforce attrition to the extent our employees are resistant to any vaccine or testing mandates that may be imposed upon us.

Any such developments could materially and adversely affect our earnings, cash flows, and ability to make cash distributions to our unitholders.

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For these reasons, limited working arrangements and other related restrictions may impact our operations and management effectiveness and may introduce, or increase the likelihood of, material risks to our business, operations, productivity, and results of operations.

The amount of cash we have available for distribution to holders of our common units depends primarily on our cash flows rather than on our profitability, and we may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner, to enable us to pay distributions at previously announced levels to holders of our common units, or at all, even during periods in which we record net income.

Our profitability may be negatively impacted by inflation in the cost of labor, materials, and services.

Although inflation in the United States has been relatively low in recent years, the U.S.

economy could experience a significant inflationary effect from, among other things, supply chain disruptions caused by, or governmental stimulus or fiscal policies adopted in response to, the COVID-19 crisis.

While we cannot predict any future trends in the rate of inflation, the global COVID-19 pandemic has brought unprecedented uncertainty to the near-term economic outlook.

A significant increase in inflation would raise our costs for labor, materials, and services, and to the extent we are unable to recover higher costs through our commercial agreements, would negatively impact our profitability and cash flows available for distribution to unitholders.

The amount of cash we have available for distribution to holders of our common units depends primarily on our cash flows rather than on our profitability, and we may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to enable us to pay distributions at previously announced levels to holders of our common units, or at all, even during periods in which we record net income.

The amount of cash we have available for distribution primarily depends on our cash flows and not solely on profitability as determined by GAAP, which will be affected by non-cash items.

As a result, we may make cash distributions for periods in which we record losses for financial accounting purposes and may not make cash distributions for periods in which we record net earnings for financial accounting purposes.

To pay the announced fourth-quarter 2020 distribution of $0.31100 per unit per quarter, or $1.24400 per unit per year, we require per-quarter available cash of $131.3 million, or $525.1 million per year, based on the number of common units outstanding at February 1, 2021.

To pay the announced fourth-quarter 2021 distribution of $0.32700 per unit per quarter, or $1.30800 per unit per year, we require per-quarter available cash of $134.7 million, or $538.8 million per year, based on the number of common units outstanding at January 31, 2022.

We may not have sufficient available cash from operating surplus each quarter to enable us to pay distributions at currently announced levels.

The amount of cash we can distribute on our units principally depends on the amount of cash we generate from our operations, which will fluctuate from quarter to quarter.

During 2020, we significantly reduced the quarterly cash distribution on our common units and also took measures to reduce full-year 2020 capital expenditures.

These cash-preservation measures are intended to enhance our

financial strength for the duration of the COVID-19 macroeconomic disruption and the weakened commodity-price environment;

however, the duration and severity of this pandemic and concomitant economic downturn remains uncertain.

There can be no assurance that these announced actions will be adequate to preserve our financial health for the required duration and additional actions, including additional per-unit distribution reductions, may be necessary to manage through the current environment.

Furthermore, any cash we preserve from delaying or abandoning capital projects will necessarily delay or eliminate future returns we hoped to generate from previously planned projects, which may meaningfully impact our ability to generate long-term revenue and cash-flow growth.

Also, our decision to preserve cash by reducing our quarterly distribution to common unitholders may diminish the long-term value of our units and limit our ability, or increase the cost of, accessing future equity capital necessary to fund our business or to preserve our balance sheet.

We are exposed to the credit risk of third-party customers, and any material non-payment or non-performance by these parties, including with respect to our gathering, processing, transportation, and disposal agreements, could reduce our ability to make distributions to our unitholders.

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Further, to the extent any of our third-party customers is in financial distress or enters bankruptcy proceedings, the related customer contracts may be renegotiated at lower rates or altogether rejected.

For example, on April 29, 2020, we received notice that Sanchez is attempting to reject a number of midstream and downstream agreements with commercial counterparties, including Sanchez’s Springfield gathering agreements and agreements obligating Sanchez to deliver the gas volumes gathered by the Springfield system to our Brasada processing plant.

If the attempted rejection is successful, our South Texas assets could be impaired and our earnings, cash flows from operations, and ability to make cash distributions to our unitholders could be materially and adversely impacted.

Since the beginning of 2020, we have been engaged in initiatives that will facilitate our ability to operate more independently from Occidental.

While we have achieved significant milestones in our separation from Occidental, attention to such organizational activities is continuing and could divert management’s attention from our existing business.

Additionally, newly adopted systems, controls, and compliance infrastructure may face post-implementation challenges in the near term.

If any of these risks, or other unanticipated liabilities or costs were to arise, then desired benefits from our efforts to become independent from Occidental may not materialize.

Such difficulties may have a material adverse effect on our business, financial condition, results of operations, or cash available for distribution to our unitholders.

Implementation of Colorado Senate Bill 19-181 may increase costs and limit oil and natural-gas exploration and production operations in the state, which could have a material adverse effect on our customers in Colorado and significantly reduce demand for our services in the state.

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The mission of the Colorado Oil and Gas Conservation Commission (“COGCC”) has changed from fostering energy development in the state to regulating the industry in a manner that is protective of public health and safety and the environment.

The new legislation also authorizes Colorado cities and counties to assume an increased role in regulating oil and natural-gas operations within their jurisdictions in a manner that may be more stringent than state-level rules, and a few local governments have passed temporary moratoria on new oil and natural-gas projects until local governments have passed their own rules implementing the new law.

The composition of the COGCC commissioners also has been changed under the new law, with the COGCC adding a commissioner with public health expertise.

On November 23, 2020, the COGCC finalized sweeping new rules to align the commission’s new mission set forth in Senate Bill 19-181.

Some of the changes include doubling setbacks to a minimum of 2,000 feet for schools or childcare centers, enacting a prohibition on routine flaring or venting, and increased protections for wildlife.

The COGCC also approved measures to address cumulative impacts by developing a new program with the Colorado Department of Public Health and Environment, and the complete overhaul of the existing permitting procedures to create a unified permitting process.

The new rules went into effect on January 15, 2021.

Implementation of this new law and the COGCC’s new rules could limit operations as a result of delays by the state in issuing new drilling permits, and result in increased operational costs, which could have a material adverse effect on our customers in Colorado, which in turn could reduce statewide demand for our midstream services significantly.

Effective January 15, 2021, COGCC began implementing the new Senate Bill 19-181 rules that include a unified permitting process, increased setbacks from schools, limitations on venting and flaring, enhanced wildlife protections, and, in conjunction with the Colorado Department of Public Health and Environment, requirements to evaluate the cumulative impacts of oil and gas operations.

COGCC will finalize a rule proposing increased financial assurance later this year and additional rulemakings may be expected.

Operators are adjusting to the new requirements, but are experiencing delayed drilling permit issuance and potentially will face increased operating costs, which could have a material adverse effect on our customers in Colorado, which in turn could reduce statewide demand for our midstream services significantly.

Changes in laws or regulations regarding hydraulic fracturing could result in increased costs, operating restrictions, or delays in the completion of oil and natural-gas wells, which could decrease the need for our gathering and processing services.

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The repricing of credit risk and the recent relatively weak industry conditions have made, and will likely continue to make, it difficult for some entities to obtain funding.

In addition, as a result of concerns about the stability and solvency of some of our counterparties, the cost of obtaining financing from

the credit markets generally has increased as many lenders and institutional investors have increased required rates of return, enacted tighter lending standards, refused to provide funding on terms similar to the borrower’s current debt, and reduced, or in some cases, ceased to provide funding to borrowers.

In addition, as a result of concerns about the stability and solvency of some of our counterparties, the cost of obtaining financing from the credit markets generally has increased as many lenders and institutional investors have increased required rates of return, enacted tighter lending standards, refused to provide funding on terms similar to the borrower’s current debt, and reduced, or in some cases, ceased to provide funding to borrowers.

Further, we may be unable to obtain adequate funding under the RCF if our lending counterparties become unable to meet their funding obligations.

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Our results of operations could be adversely affected by asset impairments.

If commodity prices remain depressed or decline further, and producer activity reduces accordingly, we may be required to write down the value of our midstream properties if the estimated future cash flows from these properties fall below their respective net book values.

If commodity prices decrease, and producer activity reduces accordingly, we may be required to write down the value of our midstream properties if the estimated future cash flows from these properties fall below their respective net book values.

Because we are a related party of Occidental, the assets we previously acquired from Anadarko were recorded at Anadarko’s carrying value prior to the transaction.

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Further, new legislation, policies, or regulations may inhibit development plans of our producer customers, which could result in lower volumes transported across our assets.

Changes to climate-change or other air-emissions

laws and regulations, or reinterpretations of enforcement or other guidance with respect thereto, that govern the areas in which we operate may impact our operations negatively by increasing our compliance costs and the compliance costs of our customers.

Changes to climate-change or other air-emissions laws and regulations, or reinterpretations of enforcement or other guidance with respect thereto, that govern the areas in which we operate may impact our operations negatively by increasing our compliance costs and the compliance costs of our customers.

In addition, in response to concerns related to climate change, companies in the fossil fuel sector may be exposed to increasing financial risks.

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(v) requiring capital expenditures to limit or prevent releases of materials from our pipelines and facilities;

and (vi) imposition of substantial restoration and remedial liabilities and obligations with respect to abandonment of facilities and for pollution resulting from our operations or existing at our owned or operated facilities.

imposition of substantial restoration and remedial liabilities and obligations with respect to abandonment of facilities and for pollution resulting from our operations or existing at our owned or operated facilities.

Numerous governmental authorities, such as the EPA and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them, oftentimes requiring difficult and costly remedial or corrective actions.

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The adoption of any laws, regulations, or other legally enforceable mandates could increase our oil and natural-gas exploration and production customers’ operating and compliance costs and reduce the rate of production of oil or natural gas by operators with whom we have a business relationship, which could have a material adverse effect on our results of operations and cash flows.

Our construction of new assets may not result in revenue increases and is subject to regulatory, environmental, political, legal, and economic risks, which could adversely affect our results of operations and financial condition.

Our construction of new assets is subject to regulatory, environmental, political, legal, and economic risks, which could adversely affect our results of operations and financial condition.

One of the ways we intend to grow our business is through the construction of new midstream assets.

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If we undertake these projects, they may not be completed on schedule, at the budgeted cost, or at all.

In addition, our revenues may not increase immediately upon the expenditure of funds on a particular project.

Moreover, we could construct facilities to capture anticipated future growth in production in a region in which such growth does not materialize.

In addition, we could construct facilities to capture anticipated future growth in production in a region in which such growth does not materialize.

We are subject to increased scrutiny from institutional investors with respect to our governance structure and the social cost of our industry, which may adversely impact our ability to raise capital from such investors.

In recent years, certain institutional investors, including public pension funds, have placed increased importance on the implications and social cost of environmental, social, and governance (“ESG”) matters.

ESG initiatives generally seek to divert investment capital from companies involved in certain industries or with disfavored governance structures.

The energy industry as a whole has received the attention of such activists, as have companies with our partnership governance model.

Investors’ increased focus and activism related to ESG and similar matters may constrain our ability to raise capital.

Any material limitations on our ability to access capital as a result of such scrutiny could limit our ability to obtain future financing on favorable terms, or at all, or could result in increased financing costs in the future.

Similarly, such activism could negatively impact our unit price, limiting our ability to raise capital through equity issuances or debt financing, or could negatively affect our ability to engage in, expand or pursue our or its business activities, and could also prevent us from engaging in certain transactions that might otherwise be considered beneficial to us.

We have partial ownership interests in several joint-venture legal entities that we do not operate or control.

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If a significant accident or event occurs for which we are not fully insured, our operations and financial results could be adversely affected.

Our operations are subject to all of the risks and hazards inherent in gathering, processing, compressing, treating, and transporting natural gas, crude oil, NGLs, and produced water, including (i) damage to our assets and surrounding properties by natural disasters or acts of terrorism;

(ii) inadvertent damage from construction, farm, and utility equipment;

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Additionally, we may be unable to recover from prior owners of our assets, pursuant to certain indemnification rights, for potential environmental liabilities.

ESG initiatives generally seek to divert investment capital from companies involved in certain industries or with disfavored governance structures.

The energy industry as a whole has received the attention of such activists, as have companies with our partnership governance model.

Investors’ increased focus and activism related to ESG and similar matters may constrain our ability to raise capital.

Any material limitations on our ability to access capital as a result of such scrutiny could limit our ability to

obtain future financing on favorable terms, or at all, or could result in increased financing costs in the future.

RISKS INHERENT IN AN INVESTMENT IN US

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To the extent Occidental’s net interest in us declines through the sale of its holdings or otherwise, Occidental may be less incentivized to support the continued growth of our business.

Accordingly, a decrease in Occidental’s net holdings in us could have a material adverse effect on our business, results of operations, financial position, and ability to grow or make cash distributions to our unitholders.

Accordingly, a decrease in

Occidental’s net holdings in us could have a material adverse effect on our business, results of operations, financial position, and ability to grow or make cash distributions to our unitholders.

Our general partner’s liability regarding our obligations is limited.

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Furthermore, Occidental, the owner of our general partner, may transfer its ownership interest in our general partner to a third party, also without unitholder consent.

Our new general partner or the new owner of our general partner would then be in a position to replace the Board of Directors and officers of our general partner and to control the decisions taken by the Board of Directors and officers.

Our new general partner or the new owner of our general partner would then be in a position to replace the Board and officers of our general partner and to control the decisions taken by the Board and officers.

We may issue additional units without unitholder approval, which would dilute existing ownership interests.

Our partnership agreement does not limit the number of additional limited partner interests that we may issue at any time without the approval of our unitholders.

The issuance by us of additional common units or other equity securities of equal or senior rank will dilute our existing unitholders’ ownership interests and voting strength, and may reduce the market price for our common units and cash available for distribution or increase the ratio of taxable income to distributions.

The issuance by us of additional common units or other equity

securities of equal or senior rank will dilute our existing unitholders’ ownership interests and voting strength, and may reduce the market price for our common units and cash available for distribution or increase the ratio of taxable income to distributions.

The market price of our common units could be affected adversely by sales of substantial amounts of our common units in the public or private markets, including sales by Occidental or other large holders.

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Moreover, the costs of any contest with the IRS will result in a reduction in cash available for distribution to our unitholders and thus will be borne indirectly by our unitholders.

If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced.

Pursuant to the Bipartisan Budget Act of 2015, for tax years beginning after December 31, 2017, if the IRS makes audit adjustments to our income tax returns, it may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us.

Generally, we expect to elect to have our unitholders take such audit adjustment into account in accordance with their interests in us during the tax year under audit, but there can be no assurance that such election will be made, or applicable, in all circumstances.

If we are unable to have our unitholders take such audit adjustment into account in accordance with their interests in us during the tax year under audit, our current unitholders may bear some or all of the economic burden resulting from such audit adjustment, even if such unitholders did not own units in us during the tax year under audit.

If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced.

For tax years beginning after December 31, 2017, if the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us.

To the extent possible under applicable rules, our general partner may pay such amounts directly to the IRS or, if we are eligible, elect to issue a revised Schedule K-1 to each unitholder with respect to an audited and adjusted return.

No assurances can be made that such election will be practical, permissible, or effective in all circumstances.

As a result, our current unitholders may bear some or all of the economic burden resulting from such audit adjustment, even if such unitholders did not own units in us during the tax year under audit.

If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties, and interest, our cash available for distribution to our unitholders might be substantially reduced.

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federal income taxes on their share of our taxable income irrespective of whether they receive cash distributions from us.

Unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability attributable to their share of our taxable income.

Unitholders may not receive cash distributions from us

equal to their share of our taxable income or even equal to the actual tax liability attributable to their share of our taxable income.

Tax gain or loss on the disposition of our common units could be more or less than expected.

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In addition, because the amount realized includes a unitholder’s share of our nonrecourse liabilities, if they sell their units, unitholders may incur a tax liability in excess of the amount of cash they receive from the sale.

Tax-exempt entities and foreign persons face unique tax issues from owning our common units that may result in adverse tax consequences to them.

Investment in common units by tax-exempt entities, such as employee benefit plans, individual retirement accounts (or “IRAs”) and foreign persons raises issues unique to them.

Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences to them.

Investment in common units by tax-exempt entities, such as employee benefit plans, and individual retirement accounts (or “IRAs”) raises issues unique to them.

For example, virtually all of our income allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them.

Distributions to foreign persons will be reduced by withholding taxes at the highest applicable effective tax rate, and foreign persons will be required to file U.S.

federal tax returns and pay tax on their share of our taxable income.

Upon the sale, exchange or other disposition of a common unit by a foreign unitholder, the transferee is generally required to withhold 10% of the amount realized on such sale, exchange or other disposition if any portion of the gain on such sale, exchange, or other disposition would be treated as effectively connected with a U.S.

trade or business.

Department of the Treasury and the IRS have recently issued final regulations providing guidance on the application of these rules for transfers of certain publicly traded partnership interests, including our common units.

Under these regulations, the “amount realized” on a transfer of our common units will generally be the amount of gross proceeds paid to the broker effecting the applicable transfer on behalf of the transferor, and such broker will generally be responsible for the relevant withholding obligations.

Distributions to foreign unitholders may also be subject to additional withholding under these rules to the extent a portion of a distribution is attributable to an amount in excess of our cumulative net income that has not previously been distributed.

Department of the Treasury and the IRS have provided that these rules will generally not apply to transfers of our common units occurring before January 1, 2022.

Foreign unitholders should consult their tax advisor before investing in our common units.

Tax-exempt entities should consult a tax advisor before investing in our units.

unitholders will be subject to U.S.

taxes and withholding with respect to their income and gain from owning our units.

unitholders are subject to U.S.

federal income tax on income effectively connected with a U.S.

trade or business (“effectively connected income”).

A unitholder’s share of our income, gain, loss and deduction, and any gain from the sale or disposition of our units will generally be considered to be effectively connected income and subject to U.S.

federal income tax.

Additionally, distributions to non-U.S.

unitholders will be reduced by withholding taxes at the highest applicable effective tax rate.

Moreover, the transferee of an interest in a partnership that is engaged in a U.S.

trade or business is generally required to withhold 10% of the amount realized by the transferor unless the transferor certifies that it is not a foreign person.

Treasury regulations provide that the “amount realized” on a transfer of an interest in a publicly traded partnership will generally be the amount of gross proceeds paid to the broker effecting the applicable transfer on behalf of the transferor.

Treasury regulations and recent Treasury guidance further provide that withholding on a transfer of an interest in a publicly traded partnership will not be imposed on a transfer that occurs on or prior to December 31, 2022, and after that date, if effected through a broker, the obligation to withhold is imposed on the transferor’s broker.

unitholders should consult their tax advisor before investing in our common units.

We generally prorate our items of income, gain, loss, and deduction between transferors and transferees of our common units each month based on the ownership of our common units on the first day of each month, instead of on the basis of the date a particular common unit is transferred.

The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss, and deduction among our unitholders.

Date”), instead of on the basis of the date a particular common unit is transferred.

We generally prorate our items of income, gain, loss, and deduction between transferors and transferees of our common units each month based on the ownership of our common units on the first day of each month (the “Allocation Date”), instead of on the basis of the date a particular common unit is transferred.

Similarly, we generally allocate certain deductions for depreciation of capital additions, gain or loss realized on a sale or other disposition of our assets, and, in the discretion of the general partner, any other extraordinary item of income, gain, loss, or deduction based upon ownership on the Allocation Date.

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In determining items of income, gain, loss, and deduction allocable to our unitholders, we must routinely determine the fair market value of our assets.

Although we may, from time to time, consult with professional appraisers regarding valuation matters, we make many fair market value estimates using a methodology based on the market value of our common units as a means to measure the fair market value of our assets.

Although we may, from time to time, consult with professional appraisers

regarding valuation matters, we make many fair market value estimates using a methodology based on the market value of our common units as a means to measure the fair market value of our assets.

The IRS may challenge these valuation methods and the resulting allocations of income, gain, loss, and deduction.

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors