OKE, §1A diff (2015 → 2016)

ITEM 1A. RISK FACTORS Our investors should consider the following risks that could affect us and our business. Although we have tried to identify key factors, our investors need to be aware that other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our financial performance. Risks related to ONEOK Partners’ business discussed below will also affect us indirectly as we are the sole general partner and, as of December 31, 2016, owned 41.2 percent of ONEOK Partners. Investors should carefully consider the following discussion of risks and the other information included or incorporated by reference in this Annual Report, including “Forward-Looking Statements,” which are included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. RISKS RELATED TO THE MERGER TRANSACTION The Merger Transaction is subject to conditions and may not be consummated even if the required ONEOK shareholder and ONEOK Partners unitholder approvals are obtained. The Merger Transaction is subject to the satisfaction or waiver of certain conditions, including approval of the Merger Agreement by ONEOK Partners’ unitholders and approval of the issuance of ONEOK common stock in connection with the Merger Transaction by ONEOK shareholders, some of which are out of the control of ONEOK and ONEOK Partners. The Merger Agreement contains other conditions that, if not satisfied or waived, would result in the Merger Transaction not occurring, even though the ONEOK shareholders and the ONEOK Partners unitholders may have voted in favor of the Merger Transaction-related proposals presented to them. Satisfaction of some of these other conditions to the Merger Transaction is not entirely in the control of ONEOK or ONEOK Partners. In addition, ONEOK and ONEOK Partners can agree not to consummate the Merger Transaction even if all shareholder and unitholder approvals have been received. The closing conditions to the Merger Transaction may not be satisfied, and ONEOK and ONEOK Partners may choose not to, or may be unable to, waive an unsatisfied condition, which may cause the Merger Transaction not to occur. The Merger Agreement contains certain termination rights for both ONEOK and ONEOK Partners, including, among others, (i) by ONEOK or ONEOK Partners, if the Merger Transaction is not consummated by September 30, 2017, (ii) by ONEOK, if the Board of Directors or the conflicts committee of ONEOK Partners GP takes certain actions with respect to its recommendation of the Merger prior to the ONEOK Partners’ unitholder meeting, and (iii) by ONEOK Partners, if a special committee of the ONEOK Board of Directors takes certain actions with respect to its recommendation of the issuance of ONEOK common stock in connection with the Merger Transaction prior to the ONEOK shareholder meeting. In the event of termination of the Merger Agreement under certain circumstances, we may be required to pay ONEOK Partners a termination fee in the form of a temporary reduction in incentive distributions (up to, in certain instances, $300 million) and, under other certain circumstances, ONEOK Partners may be required to pay us a termination fee (up to, in certain instances, $300 million in cash). We and ONEOK Partners may incur substantial transaction-related costs in connection with the Merger Transaction. We and ONEOK Partners expect to incur nonrecurring transaction-related costs associated with completing the Merger Transaction. Nonrecurring transaction costs include, but are not limited to, fees paid to legal, financial and accounting advisors, filing fees, proxy solicitation costs and printing costs. Failure to complete, or significant delays in completing, the Merger Transaction could negatively affect the trading price of our common stock and our future business and financial results. Completion of the Merger Transaction is not assured and is subject to risks, including the risks that approval of the Merger Transaction by our shareholders or by any applicable governmental agencies or third parties is not obtained or that other closing conditions are not satisfied. If the Merger Transaction is not completed, or if there are significant delays in completing the Merger Transaction, the trading price of our common stock and our future business and financial results could be negatively affected, and we will be subject to several risks, including the following: • we and ONEOK Partners may be liable for damages to one another under the terms and conditions of the Merger Agreement; • negative reactions from the financial markets, including declines in the price of our common stock due to the fact that the current price may reflect a market assumption that the Merger Transaction will be completed; • having to pay certain significant costs relating to the Merger Transaction; and • the attention of management may have been diverted to the Merger Transaction rather than its own operations and pursuit of other opportunities that could have been beneficial to ONEOK. We may not realize the benefits we expect from the Merger Transaction. We believe that the Merger Transaction will, among other things, provide increased financial flexibility for execution of our strategic growth plan. However, our assessments and expectations regarding the anticipated benefits of the Merger Transaction may prove to be incorrect. Accordingly, there can be no assurance we will realize the anticipated benefits of the Merger Transaction. We are subject to provisions that limit our ability to pursue alternatives to the Merger Transaction and could discourage a potential acquirer of ours that does not want the Merger Transaction completed from making a favorable alternative transaction proposal. Under the Merger Agreement, we are restricted from soliciting any proposal for, or initiating discussions regarding, any acquisition transaction regarding ONEOK that is reasonably likely to impede or delay the closing of the Merger Transaction. Unless and until the Merger Agreement is terminated, subject to specified exceptions, we are restricted from, among other things, soliciting, initiating, knowingly facilitating, knowingly encouraging or knowingly inducing, any inquiry, proposal or offer for an acquisition proposal for ONEOK that is reasonably likely to impede or delay the closing of the Merger Transaction. These and other provisions in the Merger Agreement could discourage a third party that may have an interest in acquiring all or a significant part of ONEOK from considering or proposing that acquisition. RISKS INHERENT IN ONEOK’S BUSINESS Our cash flow depends heavily on the earnings and distributions of ONEOK Partners. Our partnership interest in ONEOK Partners is our primary cash-generating source. Therefore, our cash flow is heavily dependent upon the ability of ONEOK Partners to make cash distributions to its partners. A significant decline in ONEOK Partners’ earnings and/or cash distributions could have a corresponding negative impact on us. For information on the risk factors inherent in the business of ONEOK Partners, see the section below entitled “Additional Risk Factors Related to ONEOK Partners’ Business” and Item 1A, Risk Factors in the ONEOK Partners’ Annual Report. Our indebtedness could impair our financial condition and our ability to fulfill our obligations. As of December 31, 2016, we had total indebtedness of approximately $1.6 billion, which excludes the debt of ONEOK Partners. Our indebtedness could have significant consequences. For example, it could: • make it more difficult for us to satisfy our obligations with respect to our senior notes and our other indebtedness due to the increased debt-service obligations, which could, in turn, result in an event of default on such other indebtedness or our senior notes; • impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or general business purposes; • diminish our ability to withstand a downturn in our business or the economy; • require us to dedicate a substantial portion of our cash flow from operations to debt-service payments, reducing the availability of cash for working capital, capital expenditures, acquisitions, dividends or general corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which ONEOK Partners operates; and • place us at a competitive disadvantage compared with our competitors that have proportionately less debt. We are not prohibited under the indentures governing our senior notes from incurring additional indebtedness, but our debt agreements do subject us to certain operational limitations summarized in the next paragraph. If we incur significant additional indebtedness, it could worsen the negative consequences mentioned above and could affect adversely our ability to repay our other indebtedness. Our revolving debt agreements with banks contain provisions that restrict our ability to finance future operations or capital needs or to expand or pursue our business activities. For example, certain of these agreements contain provisions that, among other things, limit our ability to make loans or investments, make material changes to the nature of our business, merge, consolidate or engage in asset sales, grant liens or make negative pledges. Certain agreements also require us to maintain certain financial ratios, which limit the amount of additional indebtedness we can incur, as described in the “Liquidity and Capital Resources” section of Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation. These restrictions could result in higher costs of borrowing and impair our ability to generate additional cash. Future financing agreements we may enter into may contain similar or more restrictive covenants. If we are unable to meet our debt-service obligations, we could be forced to restructure or refinance our indebtedness, seek additional equity capital or sell assets. We may be unable to obtain financing or sell assets on satisfactory terms, or at all. Federal, state and local jurisdictions may challenge our tax return positions. The positions taken in our federal and state tax return filings require significant judgments, use of estimates and the interpretation and application of complex tax laws. Significant judgment is also required in assessing the timing and amounts of deductible and taxable items. Despite management’s belief that our tax return positions are fully supportable, certain positions may be successfully challenged by federal, state and local jurisdictions. The separation of ONE Gas could result in substantial tax liability. We have received a private letter ruling from the IRS substantially to the effect that, for U.S. federal income tax purposes, the separation and certain related transactions qualify under Sections 355 and/or 368 of the U.S. Internal Revenue Code of 1986, as amended. If the factual assumptions or representations made in the request for the private letter ruling prove to have been inaccurate or incomplete in any material respect, then we will not be able to rely on the ruling. Furthermore, the IRS does not rule on whether a distribution such as the separation satisfies certain requirements necessary to obtain tax-free treatment under section 355 of the Code. The private letter ruling was based on representations by us that those requirements were satisfied, and any inaccuracy in those representations could invalidate the ruling. In connection with the separation, we obtained an opinion of outside legal and tax counsel, substantially to the effect that, for U.S. federal income tax purposes, the separation and certain related transactions qualify under Sections 355 and 368 of the Code. The opinion relies on, among other things, the continuing validity of the private letter ruling and various assumptions and representations as to factual matters made by us which, if inaccurate or incomplete in any material respect, would jeopardize the conclusions reached by such counsel in its opinion. The opinion will not be binding on the IRS or the courts, and there can be no assurance that the IRS or the courts would not challenge the conclusions stated in the opinion or that any such challenge would not prevail. We have a holding company structure in which our subsidiaries conduct our operations and own our operating assets. We are a holding company, and our subsidiaries conduct all of our operations and own all of our operating assets. We do not have significant assets other than our interests in ONEOK Partners and the equity in our subsidiaries. As a result, our ability to pay dividends to our shareholders and to service our debt depends on the performance of our subsidiaries and their ability to distribute funds to us. The ability of our subsidiaries to make distributions to us may be restricted by, among other things, partnership agreements, credit facilities, applicable state partnership laws and other laws and regulations. If we are unable to obtain funds from our subsidiaries, we may not be able to pay dividends to our shareholders or to pay interest or principal on our debt when due. Although we control ONEOK Partners, we may have conflicts of interest with ONEOK Partners that could subject us to claims that we have breached our fiduciary duty to ONEOK Partners and its unitholders. We are the sole general partner and owned 41.2 percent of ONEOK Partners as of December 31, 2016. Conflicts of interest may arise between us and ONEOK Partners and its unitholders. In resolving these conflicts, we may favor our own interests and the interests of our affiliates over the interests of ONEOK Partners and its unitholders as long as the resolution does not conflict with the Partnership Agreement or our fiduciary duties to ONEOK Partners and its unitholders. If we are not fully reimbursed or indemnified for obligations and liabilities we incur in managing the business and affairs of ONEOK Partners, the value of our shares could decline. In our capacity as the general partner of ONEOK Partners, we may make expenditures on ONEOK Partners’ behalf for which we will seek reimbursement from ONEOK Partners. In addition, under Delaware partnership law, we have, in our capacity as ONEOK Partners’ general partner, unlimited liability for the obligations of ONEOK Partners, such as ONEOK Partners’ debts and environmental liabilities, except for those contractual obligations of ONEOK Partners that are expressly made without recourse to the general partner and as limited by the Partnership Agreement. To the extent we incur obligations on behalf of ONEOK Partners, we are entitled to be reimbursed or indemnified by ONEOK Partners. If ONEOK Partners is unable or unwilling to reimburse or indemnify us, we may be unable to satisfy these liabilities or obligations, which would likely reduce the value of our shares. ONEOK Partners’ unitholders have the right to remove us as their general partner with the approval of the holders of 66 2/3 percent of all units, excluding the units held by us, which would cause us to lose our general partner interest and incentive distribution rights in OKS and the ability to manage them. We currently manage ONEOK Partners through our ownership of its general partner interest. The Partnership Agreement gives common unitholders of ONEOK Partners the right to remove the general partner of ONEOK Partners upon the affirmative vote of holders of 66 2/3 percent of ONEOK Partners’ outstanding units, excluding the units held by the general partner and its affiliates. If we were removed as general partner of ONEOK Partners, we would receive cash or common units in exchange for our 2.0 percent general partner interest and incentive distribution rights, and our Class B units would have the right to share in Partnership quarterly cash distributions based on 123.5 percent of the amount of any Partnership cash distribution, but we would lose the ability to manage ONEOK Partners. Although the common units or cash we would receive are intended under the terms of the Partnership Agreement to fully compensate us in the event such an exchange is required, the value of these common units or investments we make with the cash over time may not be equivalent to the value of the general partner interest and the incentive distribution rights had we retained them. A reduction in ONEOK Partners’ cash distributions would disproportionately affect the amount of cash distributions to which we are entitled. Through our ownership of the incentive distribution rights in ONEOK Partners, we are entitled to receive our pro rata share of specified percentages of total cash distributions made by ONEOK Partners as it reaches established target cash distribution levels as specified in the the Partnership Agreement. We currently receive a portion of our pro rata share of cash distributions from ONEOK Partners based on the highest incremental percentage, 50 percent, to which we are entitled pursuant to our incentive distribution rights in ONEOK Partners. As a result, any reduction in quarterly cash distributions from ONEOK Partners would have the effect of disproportionately reducing the amount of all cash distributions that we receive from ONEOK Partners based on our ownership interest in the incentive distribution rights in ONEOK Partners as compared to cash distributions we receive on our General Partner interest in ONEOK Partners and our ONEOK Partners common units. Cash distributions on our incentive distribution rights in ONEOK Partners are more uncertain than cash distributions on the common and Class B units we hold. Our ownership of the incentive distribution rights in ONEOK Partners entitles us to receive our pro rata share of specified percentages of total cash distributions made by ONEOK Partners with respect to any particular quarter only in the event that ONEOK partners distributes more than $0.3025 per unit for such quarter. As a result, the holders of ONEOK Partners’ common and Class B units have a priority over the holders of ONEOK Partners’ incentive distribution rights to the extent of cash distributions by ONEOK Partners up to and including $0.3025 per unit for any quarter. This priority results in greater certainty of common unitholders and Class B unitholders receiving distributions, when compared to holders of incentive distribution rights. ONEOK Partners may issue additional units, which may increase the risk that ONEOK Partners will not have sufficient available cash to maintain or increase its per unit cash distribution level. ONEOK Partners may issue additional units, including units that rank senior to the ONEOK Partners’ common units, Class B units and the incentive distribution rights as to quarterly cash distributions. The payment of cash distributions on those additional units may increase the risk that ONEOK Partners may not have sufficient cash available to maintain or increase its per unit distribution level, which in turn may impact the available cash that we receive from ONEOK Partners to pay dividends. To the extent these units are senior to the common units, Class B units or the incentive distribution rights, there is an increased risk that we will not receive the same level or increased cash distributions on the common units, Class B units and incentive distribution rights we own. Neither the common units, Class B units nor the incentive distribution rights are entitled to any arrearages from prior quarters. Our ability to sell our partnership interests in ONEOK Partners may be limited by securities law restrictions and liquidity constraints. All of the approximately 41.3 million common units and approximately 73.0 million Class B units of ONEOK Partners that we own are either unregistered, restricted or control securities or registered control securities within the meaning of Rule 144 under the Securities Act, and thus cannot be sold by us without registration or an applicable exemption from registration. Pursuant to the terms of the Partnership Agreement, we only have registration rights with respect to such ONEOK Partners common units and Class B units if Rule 144 of the Securities Act (or any successor rule or regulation to Rule 144) or another exemption from registration is not available to enable us to dispose of such ONEOK Partners common units or Class B units at the time we desire to do so without registration under the Securities Act. Due to the foregoing limitation, we are primarily limited to sales pursuant to Rule 144, which limits selling into the market in any three-month period to an amount of ONEOK Partners’ common and/or Class B units that does not exceed the greater of 1 percent of the total number of ONEOK Partners’ common units outstanding or the average weekly reported trading volume of ONEOK Partners’ common units for the four calendar weeks prior to the sale. In addition, we face contractual limitations on our ability to sell our general partner interest and incentive distribution rights, and the market for such interests is illiquid. Holders of our common stock may not receive dividends in the amount identified in guidance, or any dividends at all. We may not have sufficient cash each quarter to pay dividends or maintain current or expected levels of dividends. The actual amount of cash we pay in the form of dividends may fluctuate from quarter to quarter and will depend on various factors, some of which are beyond our control, including the amount of cash that ONEOK Partners distributes to us, our working capital needs, our ability to borrow, the restrictions contained in our indentures and credit facility, our debt service requirements and the cost of acquisitions, if any. A failure either to pay dividends or to pay dividends at expected levels could result in a loss of investor confidence, reputational damage and a decrease in the value of our stock price. The cost of providing pension and postretirement health care benefits to eligible employees and qualified retirees is subject to changes in pension fund values and changing demographics and may increase. We have a defined benefit pension plan for certain employees and postretirement welfare plans that provide postretirement medical and life insurance benefits to certain employees who retire with at least five years of service. The cost of providing these benefits to eligible current and former employees is subject to changes in the market value of our pension and postretirement benefit plan assets, changing demographics, including longer life expectancy of plan participants and their beneficiaries and changes in health care costs. For further discussion of our defined benefit pension plan, see Note L of the Notes to Consolidated Financial Statements in this Annual Report. Any sustained declines in equity markets and reductions in bond yields may have a material adverse effect on the value of our pension and postretirement benefit plan assets. In these circumstances, additional cash contributions to our pension plans may be required, which could aversely impact our business, financial condition and liquidity. RISKS INHERENT IN BOTH ONEOK AND ONEOK PARTNERS Market volatility and capital availability could affect adversely our business. The capital and global credit markets have experienced volatility and disruption in the past. In many cases during these periods, the capital markets have exerted downward pressure on equity values and reduced the credit capacity for certain companies. Much of ONEOK Partners’ business is capital intensive, and its ability to grow is dependent, in part, upon our and ONEOK Partners’ ability to access capital at rates and on terms we determine to be attractive. Similar or more severe levels of global market disruption and volatility may have an adverse effect on us or ONEOK Partners resulting from, but not limited to, disruption of access to capital and credit markets, difficulty in obtaining financing necessary to expand facilities or acquire assets, increased financing costs and increasingly restrictive covenants. If we or ONEOK Partners’ are unable to access capital at competitive rates, ONEOK Partners’ strategy of enhancing the earnings potential of its existing assets, including through capital-growth projects and acquisitions of complementary assets or businesses, may be affected adversely. A number of factors could affect adversely our and ONEOK Partners’ ability to access capital, including: (i) general economic conditions; (ii) capital market conditions; (iii) market prices for natural gas, NGLs and other hydrocarbons; (iv) the overall health of the energy and related industries; (v) ability to maintain investment-grade credit ratings; (vi) unit price and (vii) capital structure. If our and ONEOK Partners’ ability to access capital becomes constrained significantly, our and ONEOK Partners’ interest costs and cost of equity will likely increase and could affect adversely our financial condition and future results of operations. Our operating results may be affected materially and adversely by unfavorable economic and market conditions. Economic conditions worldwide have from time to time contributed to slowdowns in the oil and natural gas industry, as well as in the specific segments and markets in which ONEOK Partners operates, resulting in reduced demand and increased price competition for its products and services. ONEOK Partners’ operating results in one or more geographic regions may also be affected by uncertain or changing economic conditions within that region. Volatility in commodity prices may have an impact on many of ONEOK Partners’ customers, which, in turn, could have a negative impact on their ability to meet their obligations to ONEOK Partners. If global economic and market conditions (including volatility in commodity markets) or economic conditions in the United States or other key markets remain uncertain or persist, spread or deteriorate further, we and ONEOK Partners may experience material impacts on our businesses, financial condition, results of operations and liquidity. Terrorist attacks directed at our or ONEOK Partners’ facilities could affect adversely our business. The United States government has issued warnings that energy assets, specifically the nation’s pipeline infrastructure, may be future targets of terrorist organizations. These developments may subject ONEOK Partners’ operations to increased risks. Any future terrorist attack that targets ONEOK Partners’ facilities, those of its customers and, in some cases, those of other pipelines, or our facilities could have a material adverse effect on our business. Our businesses are subject to market and credit risks. We and ONEOK Partners are exposed to market and credit risks in all of our operations. To reduce the impact of commodity price fluctuations, ONEOK Partners uses derivative transactions, such as swaps, futures and forwards, to hedge anticipated purchases and sales of natural gas, NGLs and crude oil and firm transportation commitments. Interest-rate swaps are also used to manage interest-rate risk. However, derivative instruments do not eliminate the risks. Specifically, such risks include commodity price changes, market supply shortages, interest-rate changes and counterparty default. The impact of these variables could result in our and ONEOK Partners’ inability to fulfill contractual obligations, significantly higher energy or fuel costs relative to corresponding sales contracts, or increased interest expense. We or ONEOK Partners may not be able to make additional strategic acquisitions or investments. Our and ONEOK Partners’ ability to make strategic acquisitions and investments will depend on: • the extent to which acquisitions and investment opportunities become available; • success in bidding for the opportunities that do become available; • regulatory approval, if required, of the acquisitions or investments on favorable terms; and • access to capital, including the ability to use our or equity in acquisitions or investments, and the terms upon which we obtain capital. If we or ONEOK Partners are unable to make strategic investments and acquisitions, we or ONEOK Partners may be unable to grow. Acquisitions that appear to be accretive may nevertheless reduce our cash from operations on a per-share basis. Any acquisition involves potential risks that may include, among other things: • inaccurate assumptions about volumes, revenues and costs, including potential synergies; • an inability to integrate successfully the businesses we acquire; • decrease in our liquidity as a result of our using a significant portion of our available cash or borrowing capacity to finance the acquisition; • a significant increase in our interest expense and/or financial leverage if we incur additional debt to finance the acquisition; • the assumption of unknown liabilities for which we are not indemnified, our indemnity is inadequate or our insurance policies may exclude from coverage; • an inability to hire, train or retain qualified personnel to manage and operate the acquired business and assets; • limitations on rights to indemnity from the seller; • inaccurate assumptions about the overall costs of equity or debt; • the diversion of management’s and employees’ attention from other business concerns; • unforeseen difficulties operating in new product areas or new geographic areas; • increased regulatory burdens; • customer or key employee losses at an acquired business; and • increased regulatory requirements. If we or ONEOK Partners consummate any future acquisitions, our capitalization and results of operations may change significantly, and investors will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of our resources to future acquisitions. Our and ONEOK Partners’ established risk-management policies and procedures may not be effective, and employees may violate our risk-management policies. We have developed and implemented a comprehensive set of policies and procedures that involve both our senior management and the Audit Committee of our Board of Directors to assist us in managing risks associated with, among other things, the marketing, trading and risk-management activities associated with our business segments. Our risk policies and procedures are intended to align strategies, processes, people, information technology and business knowledge so that risk is managed throughout the organization. As conditions change and become more complex, current risk measures may fail to adequately assess the relevant risk due to changes in the market and the presence of risks previously unknown to us. Additionally, if employees fail to adhere to our policies and procedures or if our policies and procedures are not effective, potentially because of future conditions or risks outside of our control, we may be exposed to greater risk than we had intended. Ineffective risk-management policies and procedures or violation of risk-management policies and procedures could have an adverse affect on our earnings, financial position or cash flows. Our use of financial instruments to hedge interest-rate risk may result in reduced income. We and ONEOK Partners utilize financial instruments to mitigate our exposure to interest-rate fluctuations. Hedging instruments that are used to reduce our exposure to interest-rate fluctuations could expose us to risk of financial loss, including where we may contract for variable-rate swap instruments to hedge fixed-rate instruments and the variable rate exceeds the fixed rate. In addition, these hedging arrangements may limit the benefit we would otherwise receive if we had contracted for fixed-rate swap agreements to hedge variable-rate instruments and the variable rate falls below the fixed rate. An impairment of goodwill, long-lived assets, including intangible assets, and equity-method investments could reduce our earnings. Goodwill is recorded when the purchase price of a business exceeds the fair market value of the tangible and separately measurable intangible net assets. GAAP requires us to test goodwill and intangible assets with indefinite useful lives for impairment on an annual basis or when events or circumstances occur indicating that goodwill might be impaired. Long-lived assets, including intangible assets with finite useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For the investments ONEOK Partners accounts for under the equity method, the impairment test considers whether the fair value of the equity investment as a whole, not the underlying net assets, has declined and whether that decline is other than temporary. For example, if the current energy commodity price environment persists for a prolonged period or further declines, it could result in lower volumes delivered to ONEOK Partners’ systems and impairments of ONEOK Partners’ assets or equity-method investments. If we determine that an impairment is indicated, we would be required to take an immediate noncash charge to earnings with a correlative effect on our equity and balance sheet leverage as measured by consolidated debt to total capitalization. A breach of information security, including a cybersecurity attack, or failure of one or more key information technology or operational systems, or those of third parties, may affect adversely our operations, financial results or reputation. Our businesses are dependent upon our operational systems to process a large amount of data and complex transactions. The various uses of these IT systems, networks and services include, but are not limited to: • controlling ONEOK Partners’ plants and pipelines with industrial control systems including Supervisory Control and Data Acquisition (SCADA); • collecting and storing customer, employee, investor and other stakeholder information and data; • processing transactions; • summarizing and reporting results of operations; • hosting, processing and sharing confidential and proprietary research, business plans and financial information; • complying with regulatory, legal or tax requirements; • providing data security; and • handling other processing necessary to manage our business. If any of our systems are damaged, fail to function properly or otherwise become unavailable, we may incur substantial costs to repair or replace them and may experience loss or corruption of critical data and interruptions or delays in our ability to perform critical functions, which could adversely affect our business and results of operations. Our financial results could also be affected adversely if an employee causes our operational systems to fail, either as a result of inadvertent error or by deliberately tampering with or manipulating our operational systems. In addition, dependence upon automated systems may further increase the risk that operational system flaws, employee tampering or manipulation of those systems will result in losses that are difficult to detect. Due to increased technology advances, we have become more reliant on technology to help increase efficiency in our businesses. We use computer programs to help run our financial and operations organizations, and this may subject our business to increased risks. In recent years, there has been a rise in the number of cyberattacks on companies’ network and information systems by both state-sponsored and criminal organizations, and as a result, the risks associated with such an event continue to increase. A significant failure, compromise, breach or interruption in our systems could result in a disruption of our operations, customer dissatisfaction, damage to our reputation and a loss of customers or revenues. If any such failure, interruption or similar event results in the improper disclosure of information maintained in our information systems and networks or those of our vendors, including personnel, customer and vendor information, we could also be subject to liability under relevant contractual obligations and laws and regulations protecting personal data and privacy. Efforts by us and our vendors to develop, implement and maintain security measures may not be successful in preventing these events from occurring, and any network and information systems-related events could require us to expend significant resources to remedy such event. Although we believe that we have robust information security procedures and other safeguards in place, as cyberthreats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and/or to investigate and remediate information security vulnerabilities. Cyberattacks against us or others in our industry could result in additional regulations. Current efforts by the federal government, such as the Improving Critical Infrastructure Cybersecurity executive order, and any potential future regulations could lead to increased regulatory compliance costs, insurance coverage cost or capital expenditures. We cannot predict the potential impact to our business or the energy industry resulting from additional regulations. If we fail to maintain an effective system of internal controls, we may not be able to report accurately our financial results or prevent fraud. As a result, current and potential holders of our equity and debt securities could lose confidence in our financial reporting, which would harm our business and cost of capital. Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. We cannot be certain that our efforts to maintain our internal controls will be successful, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to continue to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to maintain effective internal controls, or difficulties encountered in implementing or improving our internal controls, could harm our operating results or cause us to fail to meet our reporting obligations. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our equity interests. Changes in interest rates could affect adversely our business. We use both fixed- and variable-rate debt, and we are exposed to market risk due to the floating interest rates on our short-term borrowings. From time to time, we use interest-rate derivatives to hedge interest obligations on specific debt issuances, including anticipated debt issuances. These hedges may be ineffective, and our results of operations, cash flows and financial position could be affected adversely by significant fluctuations or increases or decreases in interest rates from current levels. A shortage of skilled labor may make it difficult for us to maintain labor productivity and competitive costs, which could affect operations and cash flows available for distribution. Our operations require skilled and experienced workers with proficiency in multiple tasks. In recent years, a shortage of workers trained in various skills associated with the midstream energy business has caused us to conduct certain operations without full staff, thus hiring outside resources, which may decrease productivity and increase costs. This shortage of trained workers is the result of experienced workers reaching retirement age and increased competition for workers in certain areas, combined with the difficulty of attracting new workers to the midstream energy industry. This shortage of skilled labor could continue over an extended period. If the shortage of experienced labor continues or worsens, it could have an adverse impact on labor productivity and costs and our ability to expand production in the event there is an increase in the demand for our products and services, which could affect adversely our operations and cash flows available for distribution to ONEOK Partners’ unitholders and, in turn, to cash flows available for dividends to ONEOK shareholders. ADDITIONAL RISKS RELATED TO ONEOK PARTNERS’ BUSINESS Risks related to ONEOK Partners’ business discussed below will also affect us as we are the sole general partner and, as of December 31, 2016, owned 41.2 percent of ONEOK Partners. Increased competition could have a significant adverse financial impact on ONEOK Partners’ business. The natural gas and natural gas liquids industries are expected to remain highly competitive. The demand for natural gas and NGLs is primarily a function of commodity prices, including prices for alternative energy sources, customer usage rates, weather, economic conditions and service costs. ONEOK Partners’ ability to compete also depends on a number of other factors, including competition from other companies for its existing customers; the efficiency, quality and reliability of the services it provides; and competition for throughput at its gathering systems, pipelines, processing plants, fractionators and storage facilities. The volatility of natural gas, crude oil and NGL prices could affect adversely ONEOK Partners’ cash flows. A significant portion of ONEOK Partners’ revenues are derived from the sale of commodities that are received as payment for natural gas gathering and processing services, for the transportation and storage of natural gas, and from the purchase and sale of NGLs and NGL products. Commodity prices have been volatile and are likely to continue to be so in the future. The prices ONEOK Partners receives for its commodities are subject to wide fluctuations in response to a variety of factors beyond ONEOK Partners’ control, including, but not limited to, the following: • overall domestic and global economic conditions; • relatively minor changes in the supply of, and demand for, domestic and foreign energy; • market uncertainty; • the availability and cost of third-party transportation, natural gas processing and fractionation capacity; • the level of consumer product demand and storage inventory levels; • ethane rejection; • geopolitical conditions impacting supply and demand for natural gas, NGLs and crude oil; • weather conditions; • domestic and foreign governmental regulations and taxes; • the price and availability of alternative fuels; • speculation in the commodity futures markets; • the effects of imports and exports on the price of natural gas, crude oil, NGL and liquefied natural gas; • the effect of worldwide energy-conservation measures; • the impact of new supplies, new pipelines, processing and fractionation facilities on location price differentials; and • technology and improved efficiency impacting supply and demand for natural gas, NGLs and crude oil. These external factors and the volatile nature of the energy markets make it difficult to reliably estimate future prices of commodities and the impact commodity price fluctuations have on ONEOK Partners’ customers and their need for its services. As commodity prices decline, ONEOK Partners is paid less for its commodities, thereby reducing its cash flow. In addition, crude oil, natural gas and NGL production could also decline due to lower prices. If the level of drilling in the regions in which ONEOK Partners operates declines substantially near its assets, ONEOK Partners’ volumes and revenue could decline. ONEOK Partners’ gathering and transportation pipeline systems are connected to, and dependent on the level of production from, natural gas and crude oil wells, from which production will naturally decline over time. As a result, its cash flows associated with these wells will also decline over time. In order to maintain or increase throughput levels on ONEOK Partners’ gathering and transportation pipeline systems and the asset utilization rates at its processing and fractionation plants, it must continually obtain new supplies. ONEOK Partners’ ability to maintain or expand its businesses depends largely on the level of drilling and production by third parties in the regions in which it operates. ONEOK Partners’ natural gas and NGL supply volumes may be impacted if producers curtail or redirect drilling and production activities. Drilling and production are impacted by factors beyond ONEOK Partners’ control, including: • demand and prices for natural gas, NGLs and crude oil; • producers’ access to capital; • producers’ finding and development costs of reserves; • producers’ desire and ability to obtain necessary permits in a timely and economic manner; • natural gas field characteristics and production performance; • surface access and infrastructure issues; and • capacity constraints on natural gas, crude oil and natural gas liquids infrastructure from the producing areas and ONEOK Partners’ facilities. Commodity prices have declined substantially and experienced significant volatility. Drilling and production activity levels may vary across ONEOK Partners’ geographic areas; however, a prolonged period of low commodity prices may reduce drilling and production activities across all areas. If ONEOK Partners’ is not able to obtain new supplies to replace the natural decline in volumes from existing wells or because of competition, throughput on its gathering and transportation pipeline systems and the utilization rates of its processing and fractionation facilities would decline, which could have a material adverse effect on its business, results of operations, financial position and cash flows, and its ability to make cash distributions. ONEOK Partners is exposed to the credit risk of its customers or counterparties, and its credit risk management may not be adequate to protect against such risk. ONEOK Partners is subject to the risk of loss resulting from nonpayment and/or nonperformance by ONEOK Partners’ customers or counterparties. ONEOK Partners’ customers or counterparties may experience rapid deterioration of their financial condition as a result of changing market conditions, commodity prices or financial difficulties that could impact their creditworthiness or ability to pay ONEOK Partners for its services. ONEOK Partners assesses the creditworthiness of its customers or counterparties and obtains collateral or contractual terms as it deems appropriate. ONEOK Partners cannot, however, predict to what extent its business may be impacted by deteriorating market or financial conditions, including possible declines in its customers’ and counterparties’ creditworthiness. The recent decline in commodity prices has negatively impacted the financial condition of certain customers and counterparties and further declines, a prolonged low commodity price environment or continued volatility could impact their ability to meet their financial obligations to ONEOK Partners. ONEOK Partners’ customers and counterparties may not perform or adhere to its existing or future contractual arrangements. To the extent ONEOK Partners’ customers and counterparties are in financial distress or commence bankruptcy proceedings, contracts with them may be subject to renegotiation or rejection under applicable provisions of the United States Bankruptcy Code. If ONEOK Partners fails to assess adequately the creditworthiness of existing or future customers and counterparties, any material nonpayment or nonperformance by its customers and counterparties due to inability or unwillingness to perform or adhere to contractual arrangements could have a material adverse impact on ONEOK Partners’ business, results of operations, financial condition and ability to make cash distributions to its unitholders. ONEOK Partners’ primary market areas are located in the Mid-Continent, Rocky Mountain, Permian Basin and Gulf Coast regions of the U.S. ONEOK Partners’ revenues are derived primarily from major integrated and independent exploration and production, pipeline, marketing and petrochemical companies. Therefore ONEOK Partners’ customers and counterparties may be similarly affected by changes in economic, regulatory or other factors that may affect its overall credit risk. Some of ONEOK Partners’ nonregulated businesses have a higher level of risk than its regulated businesses. Some of ONEOK Partners’ nonregulated operations, which include the Natural Gas Gathering and Processing segment and much of the Natural Gas Liquids segment, have a higher level of risk than its regulated operations, which include a portion of the Natural Gas Pipelines segment and a portion of the Natural Gas Liquids segment. ONEOK Partners expects to continue investing in natural gas and natural gas liquids projects and other related projects, some or all of which may involve nonregulated businesses or assets. These projects could involve risks associated with operational factors, such as competition and dependence on certain suppliers and customers; and financial, economic and political factors, such as rapid and significant changes in commodity prices, the cost and availability of capital and counterparty risk, including the inability of a counterparty, customer or supplier to fulfill a contractual obligation. Measurement adjustments on ONEOK Partners’ pipeline system may be affected materially by changes in estimation, type of commodity and other factors. Natural gas and natural gas liquids measurement adjustments occur as part of the normal operating conditions associated with ONEOK Partners’ assets. The quantification and resolution of measurement adjustments are complicated by several factors including: (1) the significant number (i.e., thousands) of meters that ONEOK Partners uses throughout its natural gas and natural gas liquids systems, primarily around its gathering and processing assets; (2) varying qualities of natural gas in the streams gathered and processed and the mixed nature of NGLs gathered and fractionated through ONEOK Partners’ systems; and (3) variances in measurement that are inherent in metering technologies. Each of these factors may contribute to measurement adjustments that can occur on ONEOK Partners’ systems, which could affect negatively its business, financial position, results of operations and cash flows. Many of ONEOK Partners’ pipeline and storage assets have been in service for several decades. Many of ONEOK Partners’ pipeline and storage assets are designed as long-lived assets. Over time the age of these assets could result in increased maintenance or remediation expenditures and an increased risk of product releases and associated costs and liabilities. Any significant increase in these expenditures, costs or liabilities could materially adversely affect ONEOK Partners’ results of operations, financial position or cash flows, as well as its ability to pay cash distributions. ONEOK Partners does not hedge fully against commodity price changes, seasonal price differentials, product price differentials or location price differentials. This could result in decreased revenues, increased costs and lower margins, adversely affecting its results of operations. Certain of ONEOK Partners’ businesses are exposed to market risk and the impact of market fluctuations of natural gas, NGLs and crude oil prices. Market risk refers to the risk of loss of cash flows and future earnings arising from adverse changes in commodity prices. ONEOK Partners’ primary commodity price exposures arise from: • the value of the NGLs and natural gas sold under POP with fee contracts, of which it retains a portion of the sales proceeds; • the price differentials between the individual NGL products with respect to ONEOK Partners’ NGL transportation and fractionation agreements; • the location price differentials in the price of natural gas and NGLs with respect to ONEOK Partners’ natural gas and NGL transportation businesses; • the seasonal price differentials of natural gas and NGLs related to storage operations; and • the fuel costs and the value of the retained fuel in-kind in ONEOK Partners’ natural gas pipelines and storage operations. To manage the risk from market price fluctuations of natural gas, NGLs and crude oil prices, ONEOK Partners may use derivative instruments such as swaps, futures, forwards and options. However, it does not hedge fully against commodity price changes and, therefore, it retains some exposure to market risk. Accordingly, any adverse changes to commodity prices could result in decreased revenue and increased costs. ONEOK Partners’ use of financial instruments and physical forward transactions to hedge market-risk exposure to commodity price and interest-rate fluctuations may result in reduced income. ONEOK Partners utilizes financial instruments and physical forward transactions to mitigate its exposure to interest rate and commodity price fluctuations. Hedging instruments that are used to reduce ONEOK Partners’ exposure to interest-rate fluctuations could expose it to risk of financial loss where it may contract for variable-rate swap instruments to hedge fixed-rate instruments and the variable rate exceeds the fixed rate. In addition, these hedging arrangements may limit the benefit ONEOK Partners would otherwise receive if it had contracted for fixed-rate swap agreements to hedge variable-rate instruments and the variable rate falls below the fixed rate. Hedging arrangements that are used to reduce ONEOK Partners’ exposure to commodity price fluctuations limit the benefit it would otherwise receive if market prices for natural gas, crude oil and NGLs exceed the stated price in the hedge instrument for these commodities. ONEOK Partners may not be able to develop and execute growth projects and acquire new assets, which could result in reduced cash distributions to its unitholders and to ONEOK. ONEOK Partners’ primary business objectives are to generate cash flow sufficient to pay quarterly cash distributions to its unitholders and to increase its quarterly cash distributions over time. ONEOK Partners’ ability to maintain and grow its distributions to unitholders depends on the growth of its existing businesses and strategic acquisitions. ONEOK Partners’ ability to make strategic acquisitions and investments will depend on: • the extent to which acquisitions and investment opportunities become available; • ONEOK Partners’ success in bidding for the opportunities that do become available; • regulatory approval, if required, of the acquisitions or investments on favorable terms; and • ONEOK Partners’ access to capital, including its ability to use its equity in acquisitions or investments, and the terms upon which it obtains capital. ONEOK Partners’ ability to develop and execute growth projects will depend on its ability to implement business development opportunities and finance such activities on economically acceptable terms. If ONEOK Partners is unable to make strategic acquisitions and investments, integrate successfully businesses that it acquires with its existing business, or develop and execute its growth projects, its future growth will be limited, which could adversely impact ONEOK Partners’ results of operations and cash flows and, accordingly, result in reduced cash distributions over time. Growing ONEOK Partners’ business by constructing new pipelines and plants or making modifications to its existing facilities subjects ONEOK Partners to construction risk and supply risks should adequate natural gas or NGL supply be unavailable upon completion of the facilities. One of the ways ONEOK Partners may grow its businesses is through the construction of new pipelines and new gathering, processing, storage and fractionation facilities and through modifications to ONEOK Partners’ existing pipelines and existing gathering, processing, storage and fractionation facilities. The construction and modification of pipelines and gathering, processing, storage and fractionation facilities may face the following risks: • projects may require significant capital expenditures, which may exceed ONEOK Partners’ estimates, and involves numerous regulatory, environmental, political, legal and weather-related uncertainties; • projects may increase demand for labor, materials and rights of way, which may, in turn, affect ONEOK Partners’ costs and schedule; • ONEOK Partners may be unable to obtain new rights of way to connect new natural gas or NGL supplies to its existing gathering or transportation pipelines; • if ONEOK Partners undertakes these projects, it may not be able to complete them on schedule or at the budgeted cost; • ONEOK Partners’ revenues may not increase immediately upon the expenditure of funds on a particular project. For instance, if ONEOK Partners builds a new pipeline, the construction will occur over an extended period of time, and it will not receive any material increases in revenues until after completion of the project; • ONEOK Partners’ may have only limited natural gas or NGL supply committed to these facilities prior to their construction; • ONEOK Partners may construct facilities to capture anticipated future growth in production in a region in which anticipated production growth does not materialize; • ONEOK Partners may rely on estimates of proved reserves in its decision to construct new pipelines and facilities, which may prove to be inaccurate because there are numerous uncertainties inherent in estimating quantities of proved reserves; and • ONEOK Partners may be required to rely on third parties downstream of its facilities to have available capacity for its delivered natural gas or NGLs, which may not yet be operational. As a result, new facilities may not be able to attract enough natural gas or NGLs to achieve ONEOK Partners’ expected investment return, which could affect materially and adversely ONEOK Partners’ results of operations, financial condition and cash flows. If production from the Western Canada Sedimentary Basin remains flat or declines, and demand for natural gas from the Western Canada Sedimentary Basin is greater in market areas other than the Midwestern United States, demand for ONEOK Partners’ interstate gas transportation services could decrease significantly. ONEOK Partners depends on a portion of natural gas supply from the Western Canada Sedimentary Basin for some of ONEOK Partners’ interstate pipelines, primarily Viking Gas Transmission and ONEOK Partners’ investment in Northern Border Pipeline, that transport Canadian natural gas from the Western Canada Sedimentary Basin to the Midwestern United States market area. If demand for natural gas increases in Canada or other markets not served by ONEOK Partners’ interstate pipelines and/or production remains flat or declines, demand for transportation service on ONEOK Partners’ interstate natural gas pipelines could decrease significantly, which could impact adversely its and our results of operations and cash flows. ONEOK Partners may not be able to replace, extend or add additional customer contracts or contracted volumes on favorable terms, or at all, which could affect ONEOK Partners’ financial condition, the amount of cash available to pay distributions and its ability to grow. Although many of ONEOK Partners’ customers and suppliers are subject to long-term contracts, if it is unable to replace or extend such contracts, add additional customers or otherwise increase the contracted volumes of natural gas and NGLs provided to it by current producers, in each case on favorable terms, if at all, ONEOK Partners’ financial condition, growth plans and the amount of cash available to pay distributions could be adversely affected. ONEOK Partners’ ability to replace, extend or add additional customer or supplier contracts, or increase contracted volumes of natural gas and NGLs from current producers, on favorable terms, or at all, is subject to a number of factors, some of which are beyond ONEOK Partners’ control, including: • the level of existing and new competition in ONEOK Partners’ businesses or from alternative fuel sources, such as electricity, coal, fuel oils or nuclear energy; • natural gas and NGL prices, demand, availability; and • margins in ONEOK Partners’ markets. Mergers between ONEOK Partners’ customers and competitors could result in lower volumes being gathered, processed, fractionated, transported or stored on its assets, thereby reducing the amount of cash it generates. Mergers between ONEOK Partners’ existing customers and its competitors could provide strong economic incentives for the combined entities to utilize their existing gathering, processing, fractionation and/or transportation systems instead of ONEOK Partners’ in those markets where the systems compete. As a result, ONEOK Partners could lose some or all of the volumes and associated revenues from these customers, and it could experience difficulty in replacing those lost volumes and revenues. Because most of ONEOK Partners’ operating costs are fixed, a reduction in volumes could result not only in less revenue but also in a decline in cash flow, which would reduce its ability to pay cash distributions to its unitholders. ONEOK Partners is subject to strict regulations at many of its facilities regarding employee safety, and failure to comply with these regulations could affect adversely ONEOK Partners’ business, financial position, results of operations and cash flows. The workplaces associated with ONEOK Partners’ facilities are subject to the requirements of OSHA and comparable state statutes that regulate the protection of the health and safety of workers. The failure to comply with OSHA requirements or general industry standards, including keeping adequate records or occupational exposure to regulated substances could expose it to civil or criminal liability, enforcement actions, and regulatory fines and penalties and could have a material adverse effect on ONEOK Partners’ business, financial position, results of operations and cash flows. ONEOK Partners’ operations are subject to operational hazards and unforeseen interruptions that could affect materially and adversely ONEOK Partners’ business and for which neither we nor ONEOK Partners may be insured adequately. ONEOK Partners’ operations are subject to all of the risks and hazards typically associated with the operation of natural gas and natural gas liquids gathering, transportation and distribution pipelines, storage facilities and processing and fractionation plants. Operating risks include but are not limited to leaks, pipeline ruptures, the breakdown or failure of equipment or processes, and the performance of pipeline facilities below expected levels of capacity and efficiency. Other operational hazards and unforeseen interruptions include adverse weather conditions, accidents, explosions, fires, the collision of equipment with ONEOK Partners’ pipeline facilities (for example, this may occur if a third party were to perform excavation or construction work near ONEOK Partners’ facilities) and catastrophic events such as tornados, hurricanes, earthquakes, floods or other similar events beyond ONEOK Partners’ control. It is also possible that ONEOK Partners’ facilities could be direct targets or indirect casualties of an act of terrorism. A casualty occurrence might result in injury or loss of life, extensive property damage or environmental damage. Liabilities incurred and interruptions to the operations of ONEOK Partners’ pipelines or other facilities caused by such an event could reduce revenues generated by ONEOK Partners and increase expenses, thereby impairing our or ONEOK Partners’ ability to meet our respective obligations. Insurance proceeds may not be adequate to cover all liabilities or expenses incurred or revenues lost, and neither we nor ONEOK Partners are fully insured against all risks inherent in our respective businesses. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially, and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage. Consequently, neither we nor ONEOK Partners may be able to renew existing insurance policies or purchase other desirable insurance on commercially reasonable terms, if at all. If either we or ONEOK Partners were to incur a significant liability for which either we or ONEOK Partners was not insured fully, it could have a material adverse effect on our or ONEOK Partners’ financial position and results of operations. Further, the proceeds of any such insurance may not be paid in a timely manner and may be insufficient if such an event were to occur. ONEOK Partners does not own all of the land on which its pipelines and facilities are located, and it leases certain facilities and equipment, which could disrupt its operations. ONEOK Partners does not own all of the land on which certain of its pipelines and facilities are located and are, therefore, subject to the risk of increased costs to maintain necessary land use. ONEOK Partners obtains the rights to construct and operate certain of its pipelines and related facilities on land owned by third parties and governmental agencies for a specific period of time. Loss of these rights, through its inability to renew right-of-way contracts on acceptable terms or increased costs to renew such rights, could have a material adverse effect on ONEOK Partners’ financial condition, results of operations and cash flows. Pipeline safety laws and regulations may impose significant costs and liabilities. Pipeline safety legislation that was signed into law in 2012, the 2011 Pipeline Safety Act, directed the Secretary of Transportation to promulgate new safety regulations for natural gas and hazardous liquids pipelines, including expanded integrity management requirements, automatic or remote-controlled valve use, excess flow valve use, leak detection system installation, testing to confirm the material strength of certain pipelines and operator verification of records confirming the maximum allowable pressure of certain gas transmission pipelines. The 2011 Pipeline Safety Act also increased the maximum penalty for violation of pipeline safety regulations from $100,000 to $200,000 per violation per day and also from $1 million to $2 million for a related series of violations. The 2011 Pipeline Safety Act, the PIPES Act or rules implementing such acts could cause ONEOK Partners to incur capital and operating expenditures for pipeline replacements or repairs, additional monitoring equipment or more frequent inspections or testing of its pipeline facilities, preventive or mitigating measures and other tasks that could result in higher operating costs or capital expenditures as necessary to comply with such standards, which costs could be significant. See further discussion in the “Regulatory, Environmental and Safety Matters” section. ONEOK Partners is subject to comprehensive energy regulation by governmental agencies, and the recovery of its costs are dependent on regulatory action. Federal, state and local agencies have jurisdiction over many of ONEOK Partners’ activities, including regulation by the FERC of its interstate pipeline assets. The profitability of ONEOK Partners’ regulated operations is dependent on its ability to pass through costs related to providing energy and other commodities to its customers by filing periodic rate cases. The regulatory environment applicable to ONEOK Partners’ regulated businesses could impair its ability to recover costs historically absorbed by its customers. ONEOK Partners is unable to predict the impact that the future regulatory activities of these agencies will have on its operating results. Changes in regulations or the imposition of additional regulations could have an adverse impact on ONEOK Partners’ business, financial condition and results of operations. ONEOK Partners’ regulated pipelines’ transportation rates are subject to review and possible adjustment by federal and state regulators. Under the Natural Gas Act, which is applicable to interstate natural gas pipelines, and the Interstate Commerce Act, which is applicable to crude oil and natural gas liquids pipelines, ONEOK Partners’ interstate transportation rates, which are regulated by the FERC, must be just and reasonable and not unduly discriminatory. Under current policy, the FERC permits interstate pipelines that are subject to cost of service regulation to include an income tax allowance when calculating their regulated rates. The FERC’s income tax allowance policy has been the subject of challenge, and ONEOK Partners cannot predict whether the FERC or a reviewing court will alter the existing policy. For example, on July 1, 2016, the U.S. Court of Appeals for the District of Columbia Circuit issued a decision that calls into question a decade of FERC policy and precedent permitting regulated companies organized as pass-through entities for income tax purposes to include an allowance for income taxes in their rates. The court has remanded the case to the FERC to allow it to have an opportunity to provide a reasoned basis for its decision on income tax allowances for partnership pipelines. The FERC has issued a Notice of Inquiry seeking comments on proposed methods to adjust FERC’s income tax policy. Comments are due in March 2017. If the FERC’s policy were to change and if the FERC were to disallow a substantial portion of ONEOK Partners’ pipelines’ income tax allowance, its regulated rates, and therefore ONEOK Partners’ revenues and ability to make quarterly cash distributions to its unitholders, could be adversely affected. If ONEOK Partners were permitted to raise its tariff rates for a particular pipeline, there might be significant delay between the time the tariff rate increase is approved and the time that the rate increase actually goes into effect, which if delayed could further reduce ONEOK Partners’ cash flow. Furthermore, competition from other pipeline systems may prevent ONEOK Partners from raising its tariff rates even if regulatory agencies permit it to do so. The regulatory agencies that regulate ONEOK Partners’ systems periodically implement new rules, regulations and terms and conditions of services subject to their jurisdiction. New initiatives or orders may adversely affect the rates charged for ONEOK Partners’ services. Finally, shippers may protest ONEOK Partners’ pipeline tariff filings, and the FERC and or state regulatory agency may investigate tariff rates. Further, the FERC may order refunds of amounts collected under newly filed rates that are determined by the FERC to be in excess of a just and reasonable level. In addition, shippers may challenge by complaint the lawfulness of tariff rates that have become final and effective. The FERC and/or state regulatory agencies also may investigate tariff rates absent shipper complaint. Any finding that approved rates exceed a just and reasonable level on the natural gas pipelines would take effect prospectively. In a complaint proceeding challenging natural gas liquids pipeline rates, if the FERC determines existing rates exceed a just and reasonable level, it could require the payment of reparations to complaining shippers for up to two years prior to the complaint. Any such action by the FERC or a comparable action by a state regulatory agency could affect adversely ONEOK Partners’ pipeline businesses’ ability to charge rates that would cover future increases in costs, or even to continue to collect rates that cover current costs, and provide for a reasonable return. ONEOK Partners’ can provide no assurance that its pipeline systems will be able to recover all of its costs through existing or future rates. ONEOK Partners’ regulated pipeline companies have recorded certain assets that may not be recoverable from its customers. Accounting policies for FERC-regulated companies permit certain assets that result from the regulated rate-making process to be recorded on ONEOK Partners’ balance sheet that could not be recorded under GAAP for nonregulated entities. ONEOK Partners considers factors such as regulatory changes and the impact of competition to determine the probability of future recovery of these assets. If ONEOK Partners determines future recovery is no longer probable, ONEOK Partners would be required to write off the regulatory assets at that time. Compliance with environmental regulations that ONEOK Partners is subject to may be difficult and costly. ONEOK Partners is subject to multiple environmental laws and regulations affecting many aspects of present and future operations, including air emissions, water quality, wastewater discharges, solid and hazardous wastes, and hazardous material and substance management. These laws and regulations require ONEOK Partners to obtain and comply with a wide variety of environmental registrations, licenses, permits, inspections and other approvals. Failure to comply with these laws, regulations, permits and licenses may expose ONEOK Partners to fines, penalties and/or interruptions in its operations that could be material to its results of operations. If a leak or spill of hazardous substance occurs from ONEOK Partners’ pipelines, gathering lines or facilities in the process of transporting natural gas or NGLs or at any facility that ONEOK Partners owns, operates or otherwise uses, ONEOK Partners could be held jointly and severally liable for all resulting liabilities, including investigation and clean-up costs, which could affect materially its results of operations and cash flows. In addition, emission controls required under the federal Clean Air Act and other similar federal and state laws could require unexpected capital expenditures at ONEOK Partners’ facilities. ONEOK Partners cannot assure that existing environmental regulations will not be revised or that new regulations will not be adopted or become applicable to it. Revised or additional regulations that result in increased compliance costs or additional operating restrictions, particularly if those costs are not fully recoverable from customers, could have a material adverse effect on ONEOK Partners’ business, financial condition and results of operations. ONEOK Partners’ operations are subject to federal and state laws and regulations relating to the protection of the environment, which may expose it to significant costs and liabilities. The risk of incurring substantial environmental costs and liabilities is inherent in ONEOK Partners’ business. ONEOK Partners’ operations are subject to extensive federal, state and local laws and regulations governing the discharge of materials into, or otherwise relating to the protection of, the environment. Examples of these laws include: • the Clean Air Act and analogous state laws that impose obligations related to air emissions; • the Clean Water Act and analogous state laws that regulate discharge of waste water from ONEOK Partners’ facilities to state and federal waters; • the federal CERCLA and analogous state laws that regulate the cleanup of hazardous substances that may have been released at properties currently or previously owned or operated by ONEOK Partners or locations to which ONEOK Partners has sent waste for disposal; and • the federal Resource Conservation and Recovery Act and analogous state laws that impose requirements for the handling and discharge of solid and hazardous waste from ONEOK Partners’ facilities. Various federal and state governmental authorities, including the EPA, have the power to enforce compliance with these laws and regulations and the permits issued under them. Violators are subject to administrative, civil and criminal penalties, including civil fines, injunctions or both. Joint and several, strict liability may be incurred without regard to fault under the CERCLA, Resource Conservation and Recovery Act and analogous state laws for the remediation of contaminated areas. There is an inherent risk of incurring environmental costs and liabilities in ONEOK Partners’ business due to its handling of the products it gathers, transports, processes and stores, air emissions related to its operations, past industry operations and waste disposal practices, some of which may be material. Private parties, including the owners of properties through which ONEOK Partners’ pipeline systems pass, may have the right to pursue legal actions to enforce compliance as well as to seek damages for noncompliance with environmental laws and regulations or for personal injury or property damage arising from ONEOK Partners’ operations. Some sites ONEOK Partners operates are located near current or former third-party hydrocarbon storage and processing operations, and there is a risk that contamination has migrated from those sites to ONEOK Partners’ sites. In addition, increasingly strict laws, regulations and enforcement policies could increase significantly ONEOK Partners’ compliance costs and the cost of any remediation that may become necessary, some of which may be material. Additional information is included under Item 1, Business under “Regulatory, Environmental and Safety Matters” and in Note P of the Notes to Consolidated Financial Statements in this Annual Report. ONEOK Partners’ insurance may not cover all environmental risks and costs or may not provide sufficient coverage in the event an environmental claim is made against ONEOK Partners. ONEOK Partners’ business may be affected materially and adversely by increased costs due to stricter pollution-control requirements or liabilities resulting from noncompliance with required operating or other regulatory permits. New environmental regulations might also materially and adversely affect ONEOK Partners’ products and activities, and federal and state agencies could impose additional safety requirements, all of which could affect materially ONEOK Partners’ profitability. ONEOK Partners may face significant costs to comply with the regulation of GHG emissions. GHG emissions originate primarily from combustion engine exhaust, heater exhaust and fugitive methane gas emissions. Various federal and state legislative proposals have been introduced to regulate the emission of GHGs, particularly carbon dioxide and methane, and the United States Supreme Court has ruled that carbon dioxide is a pollutant subject to regulation by the EPA. In addition, there have been international efforts seeking legally binding reductions in emissions of GHGs. ONEOK Partners believes it is likely that future governmental legislation and/or regulation may require it either to limit GHG emissions from its operations or to purchase allowances for such emissions that are actually attributable to its NGL customers. However, it cannot predict precisely what form these future regulations will take, the stringency of the regulations, or when they will become effective. Several legislative bills have been introduced in the United States Congress that would require carbon dioxide emission reductions. Previously considered proposals have included, among other things, limitations on the amount of GHGs that can be emitted (so called “caps”) together with systems of emissions allowances. These proposals could require ONEOK Partners to reduce emissions, even though the technology is not currently available for efficient reduction, or to purchase allowances for such emissions. Emissions also could be taxed independently of limits. In addition to activities on the federal level, state and regional initiatives could also lead to the regulation of GHG emissions sooner and/or independent of federal regulation. These regulations could be more stringent than any federal legislation that is adopted. Future legislation and/or regulation designed to reduce GHG emissions could make some of its activities uneconomic to maintain or operate. Further, ONEOK Partners may not be able to pass on the higher costs to its customers or recover all costs related to complying with GHG regulatory requirements. Its future results of operations, cash flows or financial condition could be adversely affected if such costs are not recovered through regulated rates or otherwise passed on to its customers. ONEOK Partners continues to monitor legislative and regulatory developments in this area. Although the regulation of GHG emissions may have a material impact on its operations and rates, ONEOK Partners believes it is premature to attempt to quantify the potential costs of the impacts. ONEOK Partners may be subject to physical and financial risks associated with climate change. There is a growing belief that emissions of GHGs may be linked to global climate change. Climate change creates physical and financial risk. ONEOK Partners’ customers’ energy needs vary with weather conditions, primarily temperature and humidity. For residential customers, heating and cooling represent their largest energy use. To the extent weather conditions may be affected by climate change, customers’ energy use could increase or decrease depending on the duration and magnitude of any changes. Increased energy use due to weather changes may require ONEOK Partners to invest in more pipelines and other infrastructure to serve increased demand. A decrease in energy use due to weather changes may affect its financial condition through decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions. Weather conditions outside of ONEOK Partners’ operating territory could also have an impact on its revenues. Severe weather impacts its operating territories primarily through hurricanes, thunderstorms, tornados and snow or ice storms. To the extent the frequency of extreme weather events increases, this could increase its cost of providing service. ONEOK Partners may not be able to pass on the higher costs to its customers or recover all the costs related to mitigating these physical risks. To the extent financial markets view climate change and emissions of GHGs as a financial risk, this could affect negatively its ability to access capital markets or cause ONEOK Partners to receive less favorable terms and conditions in future financings. Its business could be affected by the potential for lawsuits against GHG emitters, based on links drawn between GHG emissions and climate change. ONEOK Partners’ business is subject to regulatory oversight and potential penalties. The natural gas industry historically has been subject to heavy state and federal regulation that extends to many aspects of ONEOK Partners’ businesses and operations, including: • rates, operating terms and conditions of service; • the types of services ONEOK Partners may offer it customers; • construction of new facilities; • the integrity, safety and security of facilities and operations; • acquisition, extension or abandonment of services or facilities; • reporting and information posting requirements; • maintenance of accounts and records; and • relationships with affiliate companies involved in all aspects of the natural gas and energy businesses. Compliance with these requirements can be costly and burdensome. Future changes to laws, regulations and policies in these areas may impair ONEOK Partners’ ability to compete for business or to recover costs and may increase the cost and burden of operations. ONEOK Partners cannot guarantee that state or federal regulators will authorize any projects or acquisitions that it may propose in the future. Moreover, ONEOK Partners cannot guarantee that, if granted, any such authorizations will be made in a timely manner or will be free from potentially burdensome conditions. Failure to comply with all applicable state or federal statutes, rules and regulations and orders, could bring substantial penalties and fines. For example, under the Energy Policy Act of 2005, the FERC has civil penalty authority under the Natural Gas Act to impose penalties for current violations of up to $1 million per day for each violation. Finally, ONEOK Partners cannot give any assurance regarding future state or federal regulations under which it will operate or the effect such regulations could have on its or our business, financial condition and results of operations and cash flows. Demand for natural gas and for certain of ONEOK Partners’ products and services is highly weather sensitive and seasonal. The demand for natural gas and for certain of ONEOK Partners’ businesses’ NGL products, such as propane, is weather sensitive and seasonal, with a portion of revenues derived from sales for heating during the winter months. Weather conditions influence directly the volume of, among other things, natural gas and propane delivered to customers. Deviations in weather from normal levels and the seasonal nature of certain of ONEOK Partners’ businesses can create variations in earnings and short-term cash requirements. Energy efficiency and technological advances may affect the demand for natural gas and affect adversely ONEOK Partners’ operating results. More strict local, state and federal energy-conservation measures in the future or technological advances in heating, including installation of improved insulation and the development of more efficient furnaces, energy generation or other devices could affect the demand for natural gas and adversely affect ONEOK Partners’ and our results of operations and cash flows. In the competition for customers, ONEOK Partners may have significant levels of excess capacity on its natural gas and natural gas liquids pipelines, processing, fractionation and storage assets. ONEOK Partners’ natural gas and natural gas liquids pipelines, processing, fractionation and storage assets compete with other pipelines, processing, fractionation and storage facilities for natural gas and NGL supplies delivered to the markets it serves. As a result of competition, at any given time ONEOK Partners may have significant levels of uncontracted or discounted capacity on its pipelines, processing, fractionation and in its storage assets, which could have a material adverse impact on ONEOK Partners’ or our results of operations and cash flows. Any reduction in ONEOK Partners’ credit ratings could affect materially and adversely its business, financial condition, liquidity and results of operations. ONEOK Partners’ senior unsecured long-term debt and commercial paper program have been assigned an investment-grade credit rating of “Baa2” and Prime-2, respectively, by Moody’s and “BBB” and A-2, respectively, by S&P. In February 2017, in conjunction with the announcement of the Merger Transaction with ONEOK Partners described in Note B of the Notes to Consolidated Financial Statements in this Annual Report, S&P affirmed ONEOK Partners’ ratings and outlook and Moody’s placed ONEOK Partners’ credit ratings under review for a downgrade. We cannot provide assurance that any of its current ratings will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances in the future so warrant. Specifically, if Moody’s or S&P were to downgrade ONEOK Partners’ long-term debt or commercial paper rating, particularly below investment grade, its borrowing costs would increase, which would affect adversely its financial results, and its potential pool of investors and funding sources could decrease. Ratings from credit agencies are not recommendations to buy, sell or hold ONEOK Partners’ securities. Each rating should be evaluated independently of any other rating. An event of default may require ONEOK Partners to offer to repurchase certain of its senior notes or may impair its ability to access capital. The indentures governing ONEOK Partners’ senior notes include an event of default upon the acceleration of other indebtedness of $100 million or more. Such events of default would entitle the trustee or the holders of 25 percent in aggregate principal amount of ONEOK Partners’ outstanding senior notes to declare those senior notes immediately due and payable in full. ONEOK Partners may not have sufficient cash on hand to repurchase and repay any accelerated senior notes, which may cause ONEOK Partners to borrow money under its credit facilities or seek alternative financing sources to finance the repurchases and repayment. ONEOK Partners could also face difficulties accessing capital or its borrowing costs could increase, impacting its ability to obtain financing for acquisitions or capital expenditures, to refinance indebtedness and to fulfill its debt obligations. ONEOK Partners’ indebtedness could impair its financial condition and ability to fulfill its obligations. As of December 31, 2016, ONEOK Partners had total indebtedness of approximately $7.9 billion. Its indebtedness could have significant consequences. For example, it could: • make it more difficult to satisfy its obligations with respect to its senior notes and other indebtedness, which could in turn result in an event of default on such other indebtedness or its senior notes; • impair its ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or general business purposes; • diminish its ability to withstand a downturn in its business or the economy; • require it to dedicate a substantial portion of its cash flow from operations to debt-service payments, thereby reducing the availability of cash for working capital, capital expenditures, acquisitions, distributions to partners and general partnership purposes; • limit its flexibility in planning for, or reacting to, changes in its business and the industry in which it operates; and • place it at a competitive disadvantage compared with its competitors that have proportionately less debt. ONEOK Partners is not prohibited under the indentures governing its senior notes from incurring additional indebtedness, but its debt agreements do subject it to certain operational limitations summarized in the next paragraph. ONEOK Partners’ incurrence of significant additional indebtedness would exacerbate the negative consequences mentioned above and could affect adversely its ability to repay its senior notes and other indebtedness. ONEOK Partners’ debt agreements contain provisions that restrict its ability to finance future operations or capital needs or to expand or pursue its business activities. For example, certain of these agreements contain provisions that, among other things, limit its ability to make loans or investments, make material changes to the nature of its business, merge, consolidate or engage in asset sales, grant liens or make negative pledges. Certain agreements also require it to maintain certain financial ratios, which limit the amount of additional indebtedness it can incur. For example, the ONEOK Partners Credit Agreement contains a financial covenant requiring it to maintain a ratio of indebtedness to adjusted EBITDA (EBITDA, as defined in the ONEOK Partners Credit Agreement, adjusted for all noncash charges and increased for projected EBITDA from certain lender-approved capital expansion projects) of no more than 5.0 to 1. If ONEOK Partners consummates one or more acquisitions in which the aggregate purchase price is $25 million or more, the allowable ratio of indebtedness to adjusted EBITDA will increase to 5.5 to 1 for the quarter in which the acquisition was completed and the two following quarters. These restrictions could result in higher costs of borrowing and impair ONEOK Partners’ ability to generate additional cash. Future financing agreements ONEOK Partners may enter into may contain similar or more restrictive covenants. If ONEOK Partners is unable to meet its debt-service obligations, it could be forced to restructure or refinance its indebtedness, seek additional equity capital or sell assets. It may be unable to obtain financing, raise equity or sell assets on satisfactory terms, or at all. Borrowings under the ONEOK Partners Credit Agreement and its senior notes are nonrecourse to ONEOK, and ONEOK does not guarantee the debt, commercial paper or other similar commitments of ONEOK Partners. Following the completion of the Merger Transaction, we and ONEOK Partners expect to enter into a cross guarantee agreement whereby each party to the agreement unconditionally guarantees and becomes liable for the indebtedness of each other party to the agreement. ONEOK Partners has adopted certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss and deduction. The IRS may challenge these methodologies or the resulting allocations, and such a challenge could affect adversely the value of ONEOK Partners’ common units. When ONEOK Partners issues additional units or engages in certain other transactions, ONEOK Partners determines the fair market value of its assets and allocates any unrealized gain or loss attributable to its assets to the capital accounts of its unitholders and its general partner. ONEOK Partners’ methodology may be viewed as understating the value of its assets. In that case, there may be a shift of income, gain, loss and deduction between certain unitholders and the general partner, which may be unfavorable to such unitholders. Moreover, under ONEOK Partners’ current valuation methods, subsequent purchasers of common units may have a greater portion of their Internal Revenue Code Section 743(b) adjustment allocated to ONEOK Partners’ tangible assets and a lesser portion allocated to ONEOK Partners’ intangible assets. The IRS may challenge ONEOK Partners’ valuation methods or ONEOK Partners’ allocation of the Section 743(b) adjustment attributable to ONEOK Partners’ tangible and intangible assets, and allocations of income, gain, loss and deduction between the general partner and certain of ONEOK Partners’ unitholders. A successful IRS challenge to these methods or allocations could affect adversely the amount, character and timing of taxable income or loss being allocated to ONEOK Partners’ unitholders. It also could affect the amount of gain from ONEOK Partners unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to ONEOK Partners unitholders’ tax returns without the benefit of additional deductions. ONEOK Partners’ treatment of a purchaser of common units as having the same tax benefits as the seller could be challenged, resulting in a reduction in value of the common units. Because ONEOK Partners cannot match transferors and transferees of common units, ONEOK Partners is required to maintain the uniformity of the economic and tax characteristics of these units in the hands of the purchasers and sellers of these units. ONEOK Partners does so by adopting certain depreciation conventions that do not conform to all aspects of existing United States Treasury regulations. A successful IRS challenge to these conventions could affect adversely the tax benefits to a unitholder of ownership of the common units and could have a negative impact on their value or result in audit adjustments to ONEOK Partners unitholders’ tax returns. Increased regulation of exploration and production activities, including hydraulic fracturing and disposal of waste water, could result in reductions or delays in drilling and completing new oil and natural gas wells, which could impact adversely ONEOK Partners’ revenues by decreasing the volumes of unprocessed natural gas and NGLs transported on its or its joint ventures’ natural gas and natural gas liquids pipelines. The natural gas industry is relying increasingly on natural gas supplies from nonconventional sources, such as shale and tight sands. Natural gas extracted from these sources frequently requires hydraulic fracturing, which involves the pressurized injection of water, sand, and chemicals into the geologic formation to stimulate natural gas production. Recently, there have been initiatives at the federal and state levels to regulate or otherwise restrict the use of hydraulic fracturing or the disposal of waste water used in the hydraulic fracturing process, and several states have adopted regulations that impose more stringent permitting, disclosure and well-completion requirements on hydraulic fracturing operations. Legislation or regulations placing restrictions on hydraulic fracturing activities, including waste-water disposal, could impose operational delays, increased operating costs and additional regulatory burdens on exploration and production operators, which could reduce their production of unprocessed natural gas and, in turn, adversely affect ONEOK Partners’ revenues and results of operations by decreasing the volumes of unprocessed natural gas and NGLs gathered, treated, processed, fractionated and transported on ONEOK Partners’ or its joint ventures’ natural gas and natural gas liquids pipelines, several of which gather unprocessed natural gas and NGLs from areas where the use of hydraulic fracturing is prevalent. Continued development of new supply sources could impact demand. The discovery of nonconventional natural gas production areas nearer to certain market areas that ONEOK Partners serves may compete with natural gas originating in production areas connected to ONEOK Partners’ systems. For example, the Marcellus Shale in Pennsylvania, New York, West Virginia and Ohio may cause natural gas in supply areas connected to ONEOK Partners’ systems to be diverted to markets other than its traditional market areas and may affect capacity utilization adversely on ONEOK Partners’ pipeline systems and ONEOK Partners’ ability to renew or replace existing contracts at rates sufficient to maintain current revenues and cash flows. In addition, supply volumes from these nonconventional natural gas production areas may compete with and displace volumes from the Mid-Continent, Permian, Rocky Mountains and Canadian supply sources in certain of ONEOK Partners’ markets. In the Natural Gas Gathering and Processing segment, the development of these new nonconventional reserves could move drilling rigs from ONEOK Partners’ current service areas to other areas, which may reduce demand for ONEOK Partners’ services. In the Natural Gas Pipelines segment, the displacement of natural gas originating in supply areas connected to ONEOK Partners’ pipeline systems by these new supply sources that are closer to the end-use markets could result in lower transportation revenues, which could have a material adverse impact on ONEOK Partners’ business, financial condition, results of operations and cash flows. A court may use fraudulent conveyance considerations to avoid or subordinate the Intermediate Partnership’s guarantee of certain of ONEOK Partners’ senior notes. Various applicable fraudulent conveyance laws have been enacted for the protection of creditors. A court may use fraudulent conveyance laws to subordinate or avoid the guarantee of certain of ONEOK Partners’ senior notes issued the Intermediate Partnership. It is also possible that under certain circumstances, a court could hold that the direct obligations of the Intermediate Partnership could be superior to the obligations under that guarantee. A court could avoid or subordinate the Intermediate Partnership’s guarantee of certain of ONEOK Partners’ senior notes in favor of the Intermediate Partnership’s other debts or liabilities to the extent that the court determined either of the following were true at the time the Intermediate Partnership issued the guarantee: • the Intermediate Partnership incurred the guarantee with the intent to hinder, delay or defraud any of its present or future creditors or the Intermediate Partnership contemplated insolvency with a design to favor one or more creditors to the total or partial exclusion of others; or • the Intermediate Partnership did not receive fair consideration or reasonable equivalent value for issuing the guarantee and, at the time it issued the guarantee, the Intermediate Partnership: - was insolvent or rendered insolvent by reason of the issuance of the guarantee; - was engaged or about to engage in a business or transaction for which its remaining assets constituted unreasonably small capital; or - intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured. The measure of insolvency for purposes of the foregoing will vary depending upon the law of the relevant jurisdiction. Generally, however, an entity would be considered insolvent for purposes of the foregoing if: • the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all of its assets at a fair valuation; • the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or • it could not pay its debts as they become due. Among other things, a legal challenge of the Intermediate Partnership’s guarantee of certain of ONEOK Partners’ senior notes on fraudulent conveyance grounds may focus on the benefits, if any, realized by the Intermediate Partnership as a result of ONEOK Partners’ issuance of such senior notes. To the extent the Intermediate Partnership’s guarantee of certain of ONEOK Partners’ senior notes is avoided as a result of fraudulent conveyance or held unenforceable for any other reason, the holders of such senior notes would cease to have any claim in respect of the guarantee. ONEOK Partners may be unable to cause its joint ventures to take or not to take certain actions unless some or all of its joint-venture participants agree. ONEOK Partners participates in several joint ventures. Due to the nature of some of these arrangements, each participant in these joint ventures has made substantial investments in the joint venture and, accordingly, has required that the relevant charter documents contain certain features designed to provide each participant with the opportunity to participate in the management of the joint venture and to protect its investment, as well as any other assets that may be substantially dependent on or otherwise affected by the activities of that joint venture. These participation and protective features customarily include a corporate governance structure that requires at least a majority-in-interest vote to authorize many basic activities and requires a greater voting interest (sometimes up to 100 percent) to authorize more significant activities. Examples of these more significant activities are large expenditures or contractual commitments, the construction or acquisition of assets, borrowing money or otherwise raising capital, transactions with affiliates of a joint-venture participant, litigation and transactions not in the ordinary course of business, among others. Thus, without the concurrence of joint-venture participants with enough voting interests, ONEOK Partners may be unable to cause any of its joint ventures to take or not to take certain actions, even though those actions may be in the best interest of ONEOK Partners or the particular joint venture. Moreover, any joint-venture owner generally may sell, transfer or otherwise modify its ownership interest in a joint venture, whether in a transaction involving third parties or the other joint-venture owners. Any such transaction could result in ONEOK Partners being required to partner with different or additional parties. ONEOK Partners’ operating cash flow is derived partially from cash distributions it receives from its unconsolidated affiliates. ONEOK Partners’ operating cash flow is derived partially from cash distributions it receives from its unconsolidated affiliates, as discussed in Note N of the Notes to Consolidated Financial Statements. The amount of cash that ONEOK Partners’ unconsolidated affiliates can distribute principally depends upon the amount of cash flow these affiliates generate from their respective operations, which may fluctuate from quarter to quarter. ONEOK Partners does not have any direct control over the cash distribution policies of its unconsolidated affiliates. This lack of control may contribute to ONEOK Partners’ not having sufficient available cash each quarter to continue paying distributions at its current levels. Additionally, the amount of cash that ONEOK Partners has available for cash distribution depends primarily upon its cash flow, including cash flow from financial reserves and working capital borrowings, and is not solely a function of profitability, which will be affected by noncash items such as depreciation, amortization and provisions for asset impairments. As a result, ONEOK Partners may be able to make cash distributions during periods when it records losses and may not be able to make cash distributions during periods when it records net income. ITEM 1B.