Western Midstream Operating, LP

Pipeline Safety and Maintenance

Many of the pipelines we use to gather and transport oil, natural gas, and NGLs are subject to regulation by the Pipeline and Hazardous Materials Safety Administration (“PHMSA”), an agency under the U.S. Department of Transportation (“DOT”). Natural-gas pipelines are subject to PHMSA pursuant to the Natural Gas Pipeline Safety Act of 1968, as amended (the “NGPSA”). Crude-oil and NGLs pipelines are regulated by PHMSA pursuant to the Hazardous Liquids Pipeline Safety Act of 1979, as amended (the “HLPSA”). The NGPSA and HLPSA govern the design, installation, testing, construction, operation, replacement, and management of natural-gas, crude-oil, NGLs, and condensate pipeline facilities. Pursuant to these acts, PHMSA has promulgated regulations governing, among other things, pipeline wall thicknesses, design pressures, maximum allowable operating pressures (“MAOP”), pipeline patrols and leak surveys, minimum depth requirements, emergency procedures, and other matters intended to ensure adequate protection for the public and to prevent accidents and failures. Additionally, PHMSA has promulgated regulations requiring pipeline operators to develop and implement integrity-management programs for certain gas and hazardous liquid pipelines that, in the event of a pipeline leak or rupture, could affect high consequence areas (“HCAs”), where a release could have the most significant adverse consequences, including high population areas, certain drinking water sources, and unusually sensitive ecological areas. Past operation of our pipelines with respect to these NGPSA and HLPSA requirements has not resulted in the incurrence of material costs; however, the possibility of new or amended laws and regulations or reinterpretation of PHMSA enforcement practices or other guidance with respect thereto exists, and future compliance with the NGPSA, HLPSA, and new or amended PHMSA regulations could result in increased costs that could have a material adverse effect on our results of operations or financial position.

The following is an example of proposed and/or final pipeline safety and maintenance regulations or other regulatory initiatives that could have a potentially material impact on our business:

•Leak Detection and Repair. In May 2023, PHMSA proposed revisions to the pipeline safety regulations to enhance leak detection and repair requirements for gas distribution, gas transmission, gas gathering, underground natural-gas storage, and liquefied natural-gas storage facilities. The proposed rule requires use of commercially available, advanced technologies to find and fix leaks of methane and gases. If finalized, the rule would, among other things, increase frequency of leakage survey and patrolling requirements, require advanced leak detection technology, lower the minimum reporting threshold for leaks, and establish specific criteria and timeframes for fixing equipment. If implemented, the rule could increase manpower and equipment expenditures for implementation and ongoing compliance.

New laws or regulations adopted by PHMSA, like those summarized above, may impose more stringent requirements applicable to integrity-management programs and other pipeline-safety aspects of our operations, which could cause us to incur increased capital and operating costs and operational delays. In addition, while states are largely preempted by federal law from regulating pipeline safety for interstate lines, most are certified by PHMSA to assume responsibility for enforcing federal intrastate pipeline regulations and inspection of intrastate pipelines. In practice, because states can adopt stricter standards for intrastate pipelines than those imposed by the federal government for interstate lines, states vary considerably in their authority and capacity to address pipeline safety. Historically, our intrastate pipeline-safety compliance costs have not had a material adverse effect on our operations; however, there can be no assurance that such costs will remain immaterial in the future.

See risk factor, “Federal and state legislative and regulatory initiatives relating to pipeline safety and integrity management that require the performance of ongoing assessments and implementation of preventive measures, the use of new or more-stringent safety controls or result in more-stringent enforcement of applicable legal requirements could subject us to increased capital costs, operational delays, and costs of operation” under Part I, Item 1A of this Form 10-K for further discussion on pipeline safety standards.

Interstate Natural-Gas Pipeline Regulation

The operations of our MIGC pipeline and the West Texas complex residue lines (exiting our Ramsey and Ranch Westex processing plants) are subject to regulation by FERC under the Natural Gas Act of 1938. FERC oversees various aspects of these assets’ operations, including rates, services, facility certification, capacity management, and market conduct.

FERC-regulated pipelines must comply with standards of conduct, transparency, and anti-manipulation rules, with annual reporting and public disclosures required. Both FERC and the Commodity Futures Trading Commission (the “CFTC”) have authority to impose substantial civil penalties for violations of these rules and regulations, potentially in excess of $1.0 million per day. Should we fail to comply with these regulations, we could be subject to substantial penalties and fines.

Interstate Liquids-Pipeline Regulation

Our interstate liquids pipelines, including GNB NGL, Thunder Creek NGL, FRP, TEP, and White Cliffs, are regulated by FERC as common carriers under federal law. FERC requires that pipeline rates be “just and reasonable” and uses an indexing methodology, reviewed every five years, to adjust rates. Pipelines may seek rate changes through cost-of-service or market-based approaches, and rates can be challenged or suspended pending investigation. FERC’s Revised Policy Statement restricts MLPs from recovering income tax allowances, potentially impacting revenues. The CFTC and the Federal Trade Commission also oversee market conduct and can impose significant penalties for violations, with fines potentially exceeding $1.0 million per day.

Natural-Gas Gathering Pipeline Regulation

Regulation of gas-gathering pipeline services may affect certain aspects of our business and the market for our products and services. Natural-gas gathering facilities are exempt from the jurisdiction of FERC. We believe that our gas-gathering pipelines meet the traditional tests that FERC has used to determine that a pipeline is not subject to FERC jurisdiction, although FERC has not made any determinations with respect to the jurisdictional status of any of our gas pipelines other than those owned by MIGC and the West Texas complex residue lines. However, the distinction between FERC-regulated gas-transmission services and federally unregulated gathering services has been the subject of substantial litigation, so the classification and regulation of our gathering facilities are subject to change based on future determinations by FERC, the courts, or Congress. FERC makes jurisdictional determinations on a case-by-case basis. State regulation of gathering facilities generally includes various safety, environmental, and, in some circumstances, nondiscriminatory take requirements and complaint-based rate regulation. Our natural-gas gathering operations could be adversely affected should they be subject to more stringent application of state or federal regulation of rates and services. Our natural-gas gathering operations also may be or become subject to additional safety and operational regulations relating to the design, installation, testing, construction, operation, replacement, and management of gathering facilities. Additional rules and legislation pertaining to these matters are considered or adopted from time to time. We cannot predict what effect, if any, such changes might have on our operations, but the industry could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes.

Our natural-gas gathering operations are subject to ratable-take and common-purchaser statutes in most of the states in which we operate. These statutes generally require our gathering pipelines to take natural gas without undue discrimination as to source of supply or producer. These statutes are designed to prohibit discrimination in favor of one producer over another producer or one source of supply over another source of supply. The regulations under these statutes can have the effect of imposing some restrictions on our ability as an owner of gathering facilities to decide with whom we contract to gather natural gas. The states in which we operate have adopted a complaint-based regulation of natural-gas gathering activities, which allows natural-gas producers and shippers to file complaints with state regulators in an effort to resolve grievances relating to gathering access and rate discrimination. We cannot predict whether such a complaint will be filed against us in the future. Failure to comply with state regulations can result in the imposition of administrative, civil, and criminal remedies. To date, there has been no adverse effect on our systems resulting from these regulations.

FERC’s anti-manipulation rules apply to non-jurisdictional entities to the extent the activities are conducted “in connection with” gas sales, purchases, or transportation subject to FERC jurisdiction. The anti-manipulation rules do not apply to activities that relate only to intrastate or other non-jurisdictional sales or gathering, but only to the extent such transactions do not have a “nexus” to jurisdictional transactions. In addition, FERC’s market oversight and transparency regulations also may apply to otherwise non-jurisdictional entities to the extent annual purchases and sales of natural gas reach a certain threshold. FERC’s civil penalty authority, described above, would apply to violations of these rules.

Intrastate-Pipeline Regulation

Regulation of intrastate pipeline services may affect certain aspects of our business and the market for our products and services. Intrastate natural-gas and liquids transportation is subject to regulation by state regulatory agencies. The basis for intrastate regulation of natural-gas transportation and the degree of regulatory oversight and scrutiny given to intrastate pipeline rates and services varies from state to state. Regulations within a particular state generally will affect all intrastate pipeline operators within the state on a comparable basis; thus, we believe that the regulation of intrastate transportation in any state in which we operate will not disproportionately affect our operations.

We own an interest in Red Bluff Express, which offers natural-gas transportation services under Section 311 of the Natural Gas Policy Act of 1978. Red Bluff Express is required to meet certain quarterly reporting requirements, providing detailed transaction information that could be made public. This pipeline also is subject to periodic rate review by FERC. In addition, FERC’s anti-manipulation, market-oversight, and market-transparency regulations may extend to intrastate natural-gas pipelines, although they may otherwise be non-jurisdictional, and FERC’s civil penalty authority, described above, would apply to violations of these rules.

Financial-Reform Legislation

For a description of financial reform legislation that may affect our business, financial condition, and results of operations, read Risk Factors under Part I, Item 1A of this Form 10-K for more information.