Academic journal article Energy Law Journal

Report of the Antitrust Committee

Academic journal article Energy Law Journal

Report of the Antitrust Committee

Article excerpt

This report summarizes antitrust developments that occurred during 2003 and are of particular interest to energy law practitioners.1 The following topics are covered:

I. Federal Trade Commission (FTC) Consent Orders and Statements Regarding Mergers, Acquisitions and Joint Ventures

II. Major Competition-Related Federal Energy Regulatory Commission (FERC) Issuances and Orders

III. FTC Comments on FERC Proposals

IV. FTC Comments to States

V. Court Decisions

I. FTC CONSENT ORDERS AND STATEMENTS REGARDING MERGERS, ACQUISITIONS, AND JOINT VENTURES

A. FTC Approves Conoco and Phillips Petroleum Merger

On February 7, 2003, the FTC issued a final consent order permitting the merger of Conoco Incorporated (Conoco) and Phillips Petroleum Company (Phillips).2 The FTC Complaint alleged that the merger would reduce competition and increase the possibility of coordinated effects in a variety of energy-related markets, particularly in the Rocky Mountain region.3

The consent order required the two companies to divest the following holdings: (i) Phillips' refinery in Woods Cross, Utah, and all related marketing assets (Woods Cross Refinery); (ii) Conoco's refinery in Commerce City, Colorado, and all of Phillips' marketing assets in Eastern Colorado (Colorado Assets); (iii) propane businesses, including Phillips' propane terminal assets in Jefferson City, Missouri, and East St. Louis, Illinois, as well as all propane supply agreements between Phillips and its customers; (iv) Phillips' petroleum storage and distribution terminal located in Spokane, Washington (Phillips' Spokane Terminal); and (v) Conoco's assets used for gathering, compressing, processing, transporting, or selling natural gas in specified areas of Sutton and Schleicher Counties in Texas, and specified areas of New Mexico, as well as any related contracts and agreements, and the MaIj amar Processing Plant (New Mexico Assets).4

On May 15, 2003, the FTC approved ConocoPhillips' divestiture of Conoco's Texas Assets to West Texas Gas, Inc.5 On July 31, 2003, the Commission approved the divestiture of ConocoPhillips' Colorado Assets for $450 million to Suncor Energy.6 The Commission also approved the divestiture of ConocoPhillips' New Mexico Assets7 to Frontier Field Services and of the Spokane Terminal, Phillips' Woods Cross Refinery, and related assets near Salt Lake City, Utah, to Holly Corporation.8

B. FTC Approves Southern Union 's Purchase of Panhandle Pipeline

On July 16, 2003, the FTC unanimously approved a final consent order allowing Southern Union Company (Southern Union) to purchase the Panhandle Pipeline from CMS Energy Corporation (CMS) for $1.8 billion, subject to a number of requirements and restrictions.9

Panhandle Eastern Pipeline Company (Panhandle), a subsidiary of CMS, owned and operated the Panhandle Pipeline, which transports natural gas into a number of Midwestern states.10 CMS, headquartered in Dearborn, Michigan, engages in oil and gas exploration, natural gas transportation, liquefied natural gas services, independent power production, gas and electricity distribution, and marketing and management services. Southern Union, headquartered in WilkesBarre, Pennsylvania, engages in the distribution and sale of natural gas to residential, commercial, and industrial customers in various states, including Missouri, Pennsylvania, Rhode Island, and Massachusetts.

According to the FTC, the transaction held the potential to eliminate direct competition between two pipelines (Panhandle Pipeline and Southern Star Central Pipeline), both of which serve the Kansas City area, and to increase the price of transporting natural gas by pipeline into that area. Prior to the merger agreement, Southern Star Central Pipeline, although owned by American International Group (AIG), was operated and managed by Southern Union through a subsidiary. The FTC alleged that, absent the termination of Southern Union's management of Southern Star Central Pipeline, the transaction would have: (i) placed the two Kansas City market pipelines under common ownership, management, or control; (ii) increased the likelihood that unilateral market power would be exercised in the Kansas City market area; and (iii) increased the likelihood of facilitated collusion or coordinated interaction in the Kansas City market. …

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