[Federal Register Volume 60, Number 17 (Thursday, January 26, 1995)]
[Notices]
[Pages 5217-5226]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1989]
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DEPARTMENT OF JUSTICE
United States v. El Paso Natural Gas Co.; Proposed Final Judgment
and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that a proposed Final
Judgment, Stipulation and Competitive Impact Statement have been filed
with the United States District Court for the District of
[[Page 5218]] Columbia in United States v. El Paso Natural Gas Company,
Civil No. 1:95CV00067 as to El Paso Natural Gas Company (``El Paso'').
The Complaint alleges that El Paso forced well operators seeking to
connect natural gas wells to El Paso's gas gathering system in the San
Juan Basin of New Mexico and Colorado to also purchase meter
installation service from El Paso, when the operators might otherwise
have preferred to purchase such installation elsewhere or on different
terms.
The proposed Final Judgment enjoins El Paso from requiring well
operators to purchase meter installation only from El Paso as a
condition of receiving natural gas gathering services from El Paso in
the San Juan Basin. The proposed Final Judgment also enjoins El Paso
from setting and implementing standards and procedures related to meter
installation for wells connected to its San Juan gathering system that
would enable El Paso to discriminate against persons providing meter
installation in favor of its own meter installation services.
Public comment on the Proposed Final Judgment is invited within the
statutory 60-day comment period. Such comments and responses thereto
will be published in the Federal Register and filed with the Court.
Comments should be directed to Roger Fones, Chief, Transportation,
Energy and Agriculture Section, Room 9104, U.S. Department of Justice,
Antitrust Division, 555 4th Street, NW., Washington, DC 20001
(telephone: 202-307-6351).
Constance K. Robinson,
Director of Operations, Antitrust Division.
The United States District Court for the District of Columbia
United States of America, Plaintiff, v. El Paso Natural Gas
Company, Defendant. Case Number 1:95CV00067; Judge: Harold H.
Greene; Deck Type: Antitrust; Date Stamp: 01/12/95.
Complaint
The United States of America, through its attorneys, acting under
the direction of the Attorney General of the United States, brings this
civil action to obtain equitable and other relief against the defendant
named herein and alleges as follows:
I
Nature of this Action
1. The United States brings this civil antitrust action to obtain
injunctive relief against an anticompetitive tying arrangement of the
defendant El Paso Natural Gas Company (``El Paso'') that violates
Section 1 of the Sherman Act, 15 U.S.C. Sec. 1.
2. El Paso owns and operates a natural gas gathering system located
in the San Juan Basin of the United States, which it uses to transport
natural gas produced in the basin to points of connection with mainline
interstate pipelines. El Paso's San Juan gathering system has market
power for gas gathering for wells in the San Juan Basin. Many San Juan
Basin producers have no alternative to El Paso for gas gathering. El
Paso requires persons operating gas wells in the San Juan Basin to
purchase meter installation service from it as a condition of
connecting a well or wells to its gathering system.
3. El Paso's practice of tying meter installation to its gas
gathering service has caused many well operators seeking to connect a
well to El Paso's gathering system to purchase meter installation
service at a cost higher than they otherwise would have paid, to wait
longer for installation than otherwise necessary, or both.
4. The United States seeks an injunction, pursuant to Sherman Act
Sec. 4, 15 U.S.C. Sec. 4, prohibiting El Paso from conditioning the
connection of a well to its San Juan gathering system upon a well
operator agreeing to purchase meter installation from El Paso.
II
Jurisdiction, Venue and Interstate Commerce
5. This complaint is filed and this action is instituted under
Section 4 of the Sherman Act, 15 U.S.C. Sec. 4, to prevent and restrain
the continuing violation by El Paso, as hereinafter alleged, of Section
1 of the Sherman Act, 15 U.S.C. Sec. 1. The Court has jurisdiction over
this matter pursuant to 28 U.S.C. Secs. 1331 and 1337.
6. Venue is proper in this district under 15 U.S.C. Sec. 22 and 28
U.S.C. Sec. 1391(c), because El Paso transacts business and is found
within this district.
7. El Paso is a Delaware corporation with its principal place of
business in El Paso, Texas. El Paso's total revenues for 1993 were $908
million.
8. El Paso owns and operates one of the nation's largest natural
gas transmission systems, which it uses to transport natural gas from
supply regions in New Mexico, Colorado, Texas and Oklahoma to end-users
located throughout the southwestern United States. El Paso's interstate
natural gas pipeline system provides 48 percent of the total interstate
pipeline capacity serving California. El Paso is also the principal
interstate natural gas pipeline system serving Arizona, southern
Nevada, New Mexico, and El Paso, Texas. Thus, El Paso is engaged in,
and its activities substantially affect, interstate commerce.
III
El Paso's Natural Gas Gathering System in the San Juan Basin
9. In addition to its mainline, interstate natural gas transmission
services, El Paso provides natural gas gathering services in various
gas producing basins in the United States, including the San Juan
Basin. The San Juan Basin is located primarily in northwestern New
Mexico and southern Colorado.
10. Gathering services include collecting natural gas at the well-
head and transporting the gas to locations where the gas can enter
mainline interstate transmission pipelines. ``Gathering system'' refers
to the facilities used to provide gathering service.
11. El Paso's San Juan gathering system is spread throughout the
basin and includes thousands of miles of pipeline and over 9,500 meter
stations. Approximately 200 new wells are connected to El Paso's
gathering system each year. El Paso gathers over 855 million cubic feet
per day of gas per year in the San Juan Basin.
12. Although there are other gas gathering companies that provide
gathering in the San Juan Basin, most wells are able to connect to only
one of these systems. Many well operators have no practicable
alternative to using El Paso's gathering system to get their gas out of
the San Juan Basin.
IV
El Paso's Meter Installation Practice
13. A meter measures the volume of natural gas flowing from a well
or wells into a gathering system. The volume measurements provided by
the meters are necessary to calculate charges to well operators for gas
gathering services.
14. El Paso has required or otherwise coerced its gathering
customers to purchase meter installation from it along with gathering
services. The term ``meter installation'' as used in this Complaint
means the provision of certain service necessary to connect a well to
El Paso's gathering system, including the construction and installation
of the metering equipment and the well-tie line. A well-tie line is the
pipe that connects the metering equipment to the gathering system.
15. When a well operator contacts El Paso seeking to connect a well
to El Paso's San Juan gathering system, it is El Paso's practice to
inform the operator [[Page 5219]] that El Paso will provide the
necessary meter installation. The well operator generally must agree to
pay El Paso a flat fee for the construction and installation of the
meter equipment necessary to connect the well to El Paso's system. El
Paso will not begin to install the meter until the operator has prepaid
the installation charge.
16. As an interstate pipeline, El Paso's gathering services and
rates are regulated by the Federal Energy Regulatory Commission
(``FERC'') in accordance with the Natural Gas Act (``NGA''), 15 U.S.C.
Secs. 717-717W, and the Natural Gas Policy Act (``NGPA''), 15 U.S.C.
Secs. 3302-3432. Under the NGA, all rates and charges for any
transportation or production area service subject to FERC jurisdiction
must be ``just and reasonable'' and shown on tariff schedules filed
with the FERC. The tariffs filed by El Paso at the FERC set forth the
minimum and maximum rates that El Paso may charge for mainline
transportation and production area services, including gathering.
17. El Paso charges well operators separately for meter
installation and for its gathering service. El Paso's FERC tariff for
gathering services in the San Juan Basin does not include a rate for
meter installation. Although the FERC must approve the maximum rate
that El Paso can charge for gathering, it does not regulate the price
El Paso may charge for meter installation. There are no FERC
regulations that require El Paso to perform meter installation or that
would prohibit well operators from installing their own meters.
18. The speed with which a well can be connected to the gathering
system is a significant factor in determining the potential
profitability of that well. Once a well operator has agreed that El
Paso will perform the meter installation, the well operator must rely
on El Paso to schedule that installation. In many instances, El Paso
has taken a significantly longer time to complete meter installation
than it would have taken if the well operator had been able to use an
alternative to El Paso.
19. El Paso contracts with outside construction companies in the
San Juan Basin to perform the meter installation for El Paso. These
construction companies follow El Paso's specifications regarding the
type of metering equipment and the manner of installation.
20. There are numerous construction companies in the San Juan Basin
that can properly perform meter installation. Since 1990, El Paso has
used three different outside construction companies to perform meter
installation.
21. El Paso does not manufacture the meters it uses in its meter
installations. Metering equipment meeting El Paso's specifications is
available from national companies or their agents to anyone seeking to
purchase such equipment.
22. During the past few years, a number of well operators have
requested permission from El Paso to do meter installation themselves,
rather than purchase the service from El Paso, and have been told by El
Paso that they had to use El Paso's meter installation service if they
wanted to connect a well to El Paso's gathering system.
23. Other well operators have within the last three years requested
to use someone other than El Paso to install meters when connecting a
well to El Paso's San Juan gathering system. These well operators have
abandoned their efforts to install their own meters because of
anticipated delays and unreasonable requirements imposed by El Paso. In
order to avoid these delays, these operators agreed to purchase meter
installation from El Paso rather than an alternative provider.
V
Violation Alleged
24. El Paso's provision of meter installation to well operators for
well connections in the San Juan Basin constitutes an agreement or
agreements within the meaning of Section 1 of the Sherman Act.
25. Natural gas gathering and meter installation are separate
products.
26. El Paso has market power for gas gathering from many wells
located in the San Juan Basin.
27. The amount of commerce affected in the market for meter
installation service in the San Juan Basin is substantial.
28. El Paso forces well operators to use El Paso for meter
installation when they might otherwise have preferred to purchase such
installation elsewhere or on different terms.
29. El Paso's practice of tying meter installation to gas gathering
in the San Juan Basin unreasonably restrains trade and is unlawful per
se under Section 1 of the Sherman Act.
30. The effect of El Paso's unlawful tying practice has been to
force well operators to pay a higher price for meter installation than
they might otherwise have paid, to wait longer for meter installation
than otherwise necessary, or both.
Prayer for Relief
Wherefore, the plaintiff the United States prays that:
1. El Paso be enjoined from requiring well operators to purchase
meter installation only from El Paso as a condition of receiving
gathering services from El Paso in the San Juan Basin;
2. El Paso be enjoined from setting and implementing standards and
procedures relating to meter installation for wells connected to its
San Juan gathering system that would enable El Paso to discriminate
among persons providing meter installation in favor of its own
installation services;
3. the United States be granted such other relief that the Court
may deem just and proper; and
4. the United States recover costs in this action.
Dated: January ____, 1995.
Anne K. Bingaman,
Assistant Attorney General.
Robert E. Litan,
Deputy Assistant Attorney General.
Mark C. Schechter,
Deputy Director of Operations, Antitrust Division, U.S. Department of
Justice, Washington, D.C. 20530.
Roger W. Fones,
Chief.
Donna N. Kooperstein
Assistant Chief.
Jade Alice Eaton,
Attorney, D.C. Bar No. 939629.
Jill A. Ptacek,
Attorneys, Antitrust Division, U.S. Department of Justice, 555 4th
Street, N.W. Washington, D.C. 20001, (202) 307-6316.
In the United States District Court for the District of Columbia
United States of America, Plaintiff, v. El Paso Natural Gas
Company, Defendant. Civil Action No.: 95-0067.
Stipulation
It is stipulated by and between the undersigned parties, by their
respective attorneys that:
1. The Court has jurisdiction over the subject matter of this
action and over each of the parties thereto, and venue of this action
is proper in the District of Columbia;
2. The parties consent that a Final Judgment in the form hereto
attached may be filed and entered by the Court, upon the motion of any
party or upon the Court's own motion, at any time after compliance with
the requirements of the Antitrust Procedures And Penalties Act (15
U.S.C. Sec. 16), and without further notice to any party or other
proceedings, provided that Plaintiff has not withdrawn its consent,
which it may do at any time before the entry of the proposed Final
Judgment by serving notice thereof on Defendants and by filing that
notice with the Court; [[Page 5220]]
3. In the event plaintiff withdraws its consent or if the proposed
Final Judgment is not entered pursuant to this Stipulation, this
Stipulation shall be of no effect whatsoever, and the making of this
Stipulation shall be without prejudice to any party in this or in any
other proceeding.
This 6th day of January, 1995
For the Plaintiff the United States of America:
Roger W. Fones,
Chief, Transportation, Energy, and Agriculture Section.
Donna N. Kooperstein,
Assistant Chief, Transportation, Energy, and Agriculture Section.
Jade A. Eaton,
Attorney, Transportation, Energy, and Agriculture Section.
Jill A. Ptacek,
Attorney, Transportation, Energy, and Agriculture Section.
For the Defendant El Paso Natural Gas Company:
Mary Anne Mason,
Esquire, Andrews & Kurth, L.L.P., 1701 Pennsylvania Ave., N.W.,
Washington, D.C. 20006.
Final Judgment
Plaintiff, United States of America, filed its Complaint on January
12, 1995. Plaintiff and defendant, by their respective attorneys, have
consented to the entry of this Final Judgment without trial or
adjudication of any issue of fact or law. This Final Judgment shall not
be evidence against or an admission by any party with respect to any
issue of fact or law. Therefore, before the taking of any testimony and
without trial or adjudication of any issue of fact or law herein, and
upon consent of the parties, it is hereby
Ordered, adjudged, and decreed, as follows:
I
Jurisdiction
This Court has jurisdiction of the subject matter of this action
and of each of the parties consenting hereto. The Complaint states a
claim upon which relief may be granted against the defendant under
Section 1 of the Sherman Act, 15 U.S.C. Sec. 1.
II
Definitions
As used herein, the term:
(A) ``agreement'' means a contract, arrangement, or understanding,
formal or informal, oral or written, between two or more persons;
(B) ``defendant'' means El Paso Natural Gas Company;
(C) ``document'' means all ``writings and recordings'' as that
phrase is defined in Rule 1001(1) of the Federal Rules of Evidence;
(D) ``gathering'' means collecting natural gas from the point of
entry into the gathering system and moving the gas to a point where it
is introduced into mainline transmission facilities; for gas that is
compressed, processed, or treated subsequent to receipt into the
gathering system and prior to delivery into mainline transmission
facilities, gathering also includes the act of compressing, processing,
or treating, as applicable;
(E) ``gathering system'' means the facilities used by the defendant
to perform gathering in the San Juan Basin;
(F) ``including'' means including but not limited to;
(G) ``inspection log'' means the log the defendant is required to
create and maintain pursuant to Section VI(C) of this Final Judgment,
setting forth the information recorded by the defendant pursuant to
Section VI(C)(1)-(7);
(H) ``meter'' means those devices used to measure the volume of
natural gas flowing into or through the gathering system;
(I) ``metering facilities'' means any of the equipment necessary to
connect a meter to the gathering system and to measure the flow of gas
from a well or wells into the gathering system, including the meter,
the meter house, and the meter run;
(J) ``meter installation'' means the provision of service necessary
to connect a well or wells to the gathering system, including
construction and connection of metering facilities and the well-tie
line;
(K) ``meter installation inspection'' means any inspection of
metering facilities that is required before gas may enter the gathering
system through those facilities;
(L) ``person'' means any natural person, corporation, firm,
company, sole proprietorship, partnership, association, institution,
governmental unit, or other legal entity;
(M) ``San Juan Basin'' means that area of northwestern New Mexico
and southern Colorado in which defendant owns and operates a gathering
system;
(N) ``tap'' means the interconnection between the well-tie line and
the gathering system that requires a breach of the gathering pipeline
wall, including the valve connecting the well-tie line with the
gathering pipeline wall;
(O) ``uniform'' means reasonably consistent under the
circumstances; but does not require that identical procedures must be
applied to every situation. If procedures are not identical, uniformity
requires that there exists a reasonable and lawful basis to explain any
differences or changes in the procedures applied, or in the manner in
which stated procedures are applied;
(P) ``well operator'' means any person with whom the defendant
contracts, or would contract, for meter installation, or from whom the
defendant receives an inquiry regarding connecting a well or wells to
the gathering system;
(Q) ``well-tie line'' means the pipe connecting the metering
facilities to the gathering system.
III
Applicability
(A) This Final Judgment applies to the defendant and to each of its
successors, assigns, and to all other persons in active concert or
participation with any of them who shall have received actual notice of
the Final Judgment by personal service or otherwise.
(B) Nothing herein contained shall suggest that any portion of this
Final Judgment is or has been created for the benefit of any third
party and nothing herein shall be construed to provide any rights to
any third party.
IV
Prohibited Conduct
The defendant is enjoined and restrained from:
(A) requiring a well operator to purchase metering facilities or
meter installation from the defendant, or a third party under contract
to the defendant, as a condition of connecting a well to the gathering
system;
(B) requiring a well operator to purchase construction or
installation of any pipeline that connects a well to the metering
facilities from the defendant, or a third party under contract to the
defendant, as a condition of connecting that well to the gathering
system, or imposing upon a well operator any requirements for such
construction and installation if the operator chooses to purchase such
pipeline construction and installation from a person other than the
defendant;
(C) requiring a well operator to pay any charge, other than one
included in the gathering rate, for a metering facilities maintenance
provided by the defendant or a third party under contract to the
defendant;
(D) entering into an agreement with a well operator to provide
meter installation, meter installation inspection, or installation of a
tap without first disclosing to the operator that the well operator may
have the meter installation provided by a person [[Page 5221]] other
than the defendant, or a third party under contract to the defendant.
This disclosure shall be made in the following manner:
(1) at the time of each initial contact between the defendant and a
well operator concerning the provision of gathering which will require
meter installation, the defendant shall expressly inform the well
operator that the operator may choose to provide meter installation
itself, subject to any specifications and inspections required by
defendant consistent with Section V(A)-(D);
(2) at the time of the initiation of any discussion between the
defendant and a well operator concerning the terms of any agreement
that will require the well operator to bear any cost of meter
installation, the defendant shall provide the well operator with the
following materials arranged in the following order:
a. a copy of the Notice to El Paso Natural Gas Company Gathering
Customers attached as Attachment A to this Final Judgment;
b. a statement that the defendant will, as soon as practicable,
provide the well operator with the estimates described in Section
V(D)(3);
c. A sample of the contract that the defendant uses when it
provides meter installation for a well operator;
d. a sample of the contract that the defendant uses when the well
operator provides all or part of the meter installation;
e. a copy of any specifications, standards and procedures that the
defendant, consistent with the provisions of Section V(A)-(D), may
require the well operator to follow when the operator performs the
meter installation;
(3) as soon as practicable after the initiation of any discussion
between the defendant and a well operator concerning the terms of any
agreement that will require the well operator to bear any cost of meter
installation, the defendant shall provide the well operator with:
a. a statement of the estimated total price that the defendant will
charge the well operator if the defendant provides meter installation,
and a detailed statement setting forth each of the services or
materials, and costs for those services or materials, that comprise
that total price;
b. a statement of the estimated total price that the defendant will
charge the well operator for construction or inspection if the well
operator chooses to provide for meter installation itself, and a
detailed statement setting forth the services and materials, and costs
for those services and materials, that comprise that total price;
(E) entering into an agreement with a well operator, pursuant to
which the well operator will perform meter installation, and which
includes any specifications, standards and procedures that the
defendant has imposed pursuant to Section V(A)-(D), without including
in the document memorializing that agreement:
(1) the following clause regarding access to inspection logs:
The well operator shall, upon reasonable notice, have access to
any inspections logs maintained by El Paso Natural Gas Company that
pertain to any meter installation covered by this contract, and, for
comparison purposes, access to any inspection logs maintained by El
Paso Natural Gas Company that relate to meter installation provided
by El Paso Natural Gas Company.''; and
(2) the following clause, unless the well operator waives in
writing its right to the inclusion of such clause:
In the event of a dispute related to the interpretation or
performance of this agreement, each party shall designate an
authorized agent to investigate, discuss and seek to settle the
matter between them. If the two agents are unable to settle the
matter within 10 days after notification of the designation, the
matter shall be submitted to a senior officer of each party for
consideration. If settlement cannot be reached through their efforts
within an additional 20 days, or such longer time as they shall
agree upon, the parties shall enter into a biding form of
arbitration of their dispute, the costs of which shall be
apportioned by the arbitrator.
V
Limiting Conditions
Nothing in this Final Judgment shall prohibit the defendant from:
(A) specifying the type of metering facilities a well operator must
use when connecting a well or wells to the gathering system, provided
that the specifications uniformly apply to all persons, including the
defendant;
(B) specifying standards and procedures that must be followed for
meter installation, provided that the standards and procedures
uniformly apply to all persons performing such installations, including
the defendant;
(C) requiring that meter installations provided by a well operator,
or third parties under contract to the operator, be subject to
inspection by the defendant to ensure compliance with any standards and
procedures specified by the defendant, provided that:
(1) if the defendant requires any meter installation inspections,
it does so for all meter installations, including those meter
installations provided by the defendant;
(2) the inspection process the defendant uses is uniform for all
meter installations, including those meter installations provided by
the defendant. The defendant shall ensure that the persons conducting
the inspections do not unreasonably withhold any necessary approvals,
or impose any unreasonable compliance requirements;
(3) the defendant requires persons conducting the inspections to
keep a contemporaneously written log for each inspection they conduct,
including any inspections of metering facilities installed by the
defendant;
(D) requiring a well operator to pay for any inspections the
defendant requires, consistent with the provisions of Section V(C),
provided that any charge the defendant requires for such inspections is
reasonable, calculated on a uniform basis, and is uniformly applied to
all meter installations, including those provided by the defendant;
(E) requiring a well operator to use only those persons designated
by the defendant to install a tap, provided that the defendant either:
(1) charge the well operator no more than the actual cost of
materials, equipment and labor, which labor charge shall include only
wages, benefits and payroll taxes, incurred in installation when the
defendant installs the tap, or
(2) include in any such designation at least three persons in the
San Juan Basin, other than the defendant or any third party under any
contractual relationship with the defendant, whom the operator can
select to perform such installation;
(F) specifying to a well operator the location at which a well will
be connected to the gathering system;
(G) requiring a well operator to convey to the defendant title to
the metering facilities connecting a well to the gathering system that
are installed at the operator's expense, as a condition of connecting
that well to the system, provided that the defendant agrees at the time
of any such required conveyance that title for those facilities will
revert back to the operator upon abandonment or plugging of the well,
or upon the operator's request that the defendant discontinue gathering
gas from the well;
(H) requiring the well operator to agree to indemnify the defendant
against any liability arising from the acts or omissions of the
operator, or a third party under contract to the operator, which are
related to meter installation performed by the operator or third
party; [[Page 5222]]
(I) requiring the well operator to provide defendant with a copy of
all permits or other documents issued by, or filings required by, any
authority to evidence the operator's compliance with local, state and
federal laws and regulations applicable to meter installation;
(J) requiring the well operator to provide the defendant with
copies of all right-of-way authorizations and permits;
(K) making reasonable changes to any specification, standard, or
policy instituted with regard to meter installation;
(L) providing meter installation pursuant to the provisions of
contracts between the defendant and well operators in effect prior to
May 18, 1994.
VI
Compliance Program
(A) The defendant is ordered to maintain an antitrust compliance
program which shall include designating, within 30 days of entry of
this Final Judgment, an Antitrust Compliance Officer with
responsibility for accomplishing the antitrust compliance program and
with the purpose of achieving compliance with this Final Judgment. The
Antitrust Compliance Officer shall, on a continuing basis, supervise
the review of the current and proposed activities of the defendant to
ensure that it complies with this final Judgment.
(B) The antitrust Compliance Officer shall be responsible for
accomplishing the following activities:
(1) distributing, within 60 days from the entry of this Final
Judgment, a copy of this Final Judgment to all officers and employees
with responsibility for marketing of the defendant's gathering, or for
approving and supervising the connection of a well to any of the
defendant's gathering systems;
(2) distributing in a timely manner a copy of this Final Judgment
to any officer or employee who succeeds to a position described in
Section VI(B)(1);
(3) briefing annually those persons designated in Section VI(B)(1)
on the meaning and requirements of this Final Judgment and the
antitrust laws and advising them that the defendant's legal advisors
are available to confer with them regarding compliance with the Final
Judgment and the antitrust laws;
(4) obtaining from each officer or employee designated in Section
VI(B)(1) an annual written certification that he or she: (a) has read,
understands, and agrees to abide by the terms of this Final Judgment;
and (b) has been advised and understands that his or her failure to
comply with this Final Judgment may result in conviction for criminal
contempt of court;
(5) maintaining a record of recipients to whom the Final Judgment
has been distributed and from whom the certification in Section
VI(B)(4) has been obtained;
(6) distributing, within 60 days from the entry of this Final
Judgment, by first-class mail, postage paid, a copy of the Notice to El
Paso Natural Gas Company Gathering Customers that is attached as
Attachment A to this Final Judgment to all well operators that on the
date of entry of this Final Judgment have contracts with defendant for
gathering.
(C) Each time the defendant requires a meter installation
inspection, the defendant shall create a written record setting forth
at a minimum, the following information:
(1) the name of the well operator for whom the meter installation
is being provided;
(2) the name of the person or persons providing the meter
installation;
(3) the location of the well or wells associated with the meter
installation that is the subject of the inspection;
(4) the date or dates of the inspection and the amount of time
spent engaged in the actual inspection;
(5) the total price charged for the inspection and a detailed
description of how the defendant arrived at that price;
(6) with respect to any materials or work assoicatied with the
installation which the inspector rejects, a detailed explanation of why
the inspector made the rejection;
(7) if the inspector rejects any materials used or work performed
by the person performing the installation, a detailed description of
the steps that the inspector informed that person he or she could take
to pass the inspection. The defendant shall maintain in its Farmington,
New Mexico office, a log containing the information recorded pursuant
to this subsection for a period of two years, and shall, upon
reasonable notice, make available to a well operator those portions of
the log pertaining to that well operator and any portions of the log
that pertain to meter installations provided by the defendant.
(D) At any time, if the defendant's Antitrust Compliance Officer
learns of any past or future violations of Section IV of this Final
Judgment, the defendant shall, within 45 days after such knowledge is
obtained, take apporpriate action to terminate or modify the activity
so as to comply with this Final Judgment.
VII
Certification
(A) Within 75 days after the entry of this Final Judgment, the
defendant shall certify to the plaintiff whether it has designated an
Antitrust Compliance Officer and has distributed the Final Judgment in
accordance with Section VI above.
(B) For each year of the term of this Final Judgment, the defendant
shall file with the plaintiff, on or before the anniversary date of
entry of this Final Judgment, a statement as to the fact and manner of
its compliance with the provisions of Section VI above.
VIII
Plaintiff Access
(A) To determine or secure compliance with this Final Judgment and
for no other purpose, duly authorized representatives of the plaintiff
shall, upon written request of the Assistant Attorney General in charge
of the Antitrust Division, and on reasonable notice to the defendant
made to its principal office, be permitted, subject to any legally
recognized privilege:
(1) access during the defendant's office hours to inspect and copy,
at the plaintiff's expense, all documents in the possession or under
the control of the defendant, who may have counsel present, relating to
any matters contained in this Final Judgment; and
(2) subject to the reasonable convenience of the defendant and
without restraint or interference from it, to interview officers,
employees or agents of the defendant, who may have counsel present,
regarding such matters.
(B) Upon the written request of the Assistant Attorney General in
charge of the Antitrust Division made to the defendant's principal
office, the defendant shall submit such written reports, under oath if
requested, relating to any matters contained in this Final Judgment as
may be reasonably requested, subject to any legally recognized
privilege.
(C) No information or documents obtained by the means provided in
Section VIII shall be divulged by the plaintiff to any person other
than a duly authorized representative of the Executive Branch of the
United States, except in the course of legal proceedings to which the
United States is a party, or for the purpose of securing compliance
with this Final Judgment, or as otherwise required by law.
(D) If at the time information or documents are furnished by the
defendant to plaintiff, the defendant represents and identifies in
writing the [[Page 5223]] material in any such information or documents
to which a claim of protection may be asserted under Rule 26(c)(7) of
the Federal Rules of Civil Procedure, and the defendant marks each
pertinent page of such material, ``Subject to claim of protection under
Rule 26(c)(7) of the Federal Rules of Civil Procedure,'' then 10 days'
notice shall be given by plaintiff to the defendant prior to divulging
such material in any legal proceeding (other than a grand jury
proceeding) to which the defendant is not a party.
IX
Further Elements of the Final Judgment
(A) This Final Judgment shall expire ten years from the date of
entry.
(B) Jurisdiction is retained by this Court for the purpose of
enabling any of the parties to this Final Judgment to apply to this
Court at any time for further orders and directions as may be necessary
or appropriate to carry out or construe this Final Judgment, to modify
or terminate any of its provisions, to enforce compliance, and to
punish violations of its provisions.
(C) Entry of this Final Judgment is in the public interest.
ENTERED:
----------------------------------------------------------------------
UNITED STATES DISTRICT JUDGE
Notice To El Paso Natural Gas Gathering Customers
Any customer seeking to connect a well to El Paso Natural Gas
Company's (EPNG) gathering systems has the legal right to choose to
provide meter installation subject to the conditions listed below,
rather than to have EPNG provide for installation. See United States v.
El Paso Natural Gas Company, D.D.C., No. ______ (Dec. ______ 1994).
Meter installation includes the construction and connection of metering
facilities (including the meter, the meter house, and the meter run)
and the well-tie line. If a customer chooses to perform its own meter
installation, EPNG may:
1. Specify the type of metering facilities the customer must use
when connecting a well or wells to the gathering system.
2. Specify standards and procedures that must be followed for meter
installation. EPNG's standards and procedures will be applied uniformly
to any persons providing such installations, including EPNG.
3. Require that all meter installation performed by customers be
subject to inspection by EPNG to ensure compliance with any standards
and procedures specified by EPNG. The inspection process will be
uniform for all meter installations, including those meter
installations EPNG provides. The EPNG inspectors will not unreasonably
withhold any necessary approvals or impose any unreasonable compliance
requirements. EPNG inspectors will keep a contemporaneously written log
for all inspections they conduct, including any inspections of meter
installations provided by EPNG.
4. Require the customer to pay a reasonable charge for any meter
installation inspection that EPNG conducts pursuant to 3 above. Any
such charge will be calculated on a uniform basis and uniformly applied
to all meter installations, including those performed by EPNG.
In the United States District Court for the District of Columbia
United States of America, Plaintiff, v. El Paso Natural Gas
Company, Defendant.
Case Number 1: 95CV00067
Judge: Harold H. Greene
Deck Type: Antitrust
Date Stamp: 01/12/95
Competitive Impact Statement
Pursuant to Section 2(b) of the Antitrust Procedures and Penalties
Act, 15 U.S.C. Sec. 16(b)-(h), the United States submits this
Competitive Impact Statement relating to the proposed Final Judgment
submitted for entry with the consent of defendant El Paso Natural Gas
Company (``El Paso'') in this civil antitrust proceeding.
Nature and Purpose of the Proceeding
On January 12, 1995 the United States filed a civil antitrust
Complaint alleging that El Paso had entered into a contract,
combination or conspiracy in restraint of trade in violation of Section
1 of the Sherman Act, 15 U.S.C. Sec. 1. The Complaint alleges that El
Paso, which provides natural gas gathering services in the San Juan
Basin area of New Mexico and Colorado, tied the installation of
metering facilities to the provision of its gas gathering service.
On January 12, 1995 the United States and El Paso filed a
Stipulation by which they consented to the entry of a proposed Final
Judgment designed to prevent any recurrence of such tying activity in
the future. Under the proposed Final Judgment, El Paso will be enjoined
from conditioning the provision of gas gathering service upon the
gathering customer also purchasing meter installation from El Paso. In
addition, El Paso will be required affirmatively to inform its
gathering customers that they have the option of using someone other
than El Paso to provide installation of all or part of the metering
facilities. The proposed Final Judgment allows El Paso to continue to
provide meter installation, but only after a customer has been
explicitly informed that it has the option of using someone other than
El Paso to provide this service. The decree also contains provisions to
ensure that El Paso does not disadvantage well operators who choose
competing meter installation providers.
I
Events Giving Rise to the Alleged Violation
In order to market natural gas, it must be carried by pipeline from
the point of production to the point of use. Without transportation
away from the well, natural gas has virtually no value, and no means of
transportation other than via pipeline is economical. To market gas, it
is first ``gathered'' from wells through small diameter pipes. The gas
is then fed from the gathering system into one or more interstate
pipelines that carry the gas to local distribution systems which in
turn deliver the gas to the end users (consumers). Thus, gathering is
an essential step in getting natural gas to market. Because of scale
economies and network efficiencies associated with pipelines, it is
often uneconomical associated with pipelines, it is often uneconomical
for a producer to be served by more than one pipeline system.
The San Juan Basin is a natural gas production area located in
northwestern New Mexico and southern Colorado. El Paso's gas gathering
system permeates the basin. Many of the producers that have wells
connected to El Paso's San Juan gathering system have no alternative
means of transportation. El Paso's San Juan gathering system is
regulated by the Federal Energy Regulatory Commission (``FERC''). FERC
regulations require El Paso to limit to a published tariff rate the
amount that it may charge for gathering. The FERC does not regulate the
rate that El Paso charges for meter installation associated with the
provision of its gathering service.
El Paso provides gathering at a charge based upon the volume of gas
transported. A meter is a device used to measure the volume of gas
flowing from a well into the gathering system. Connecting a well to the
gathering system involves laying pipe from the well-head to the
gathering pipeline. At the same time, metering equipment is installed
at the well-head or along the pipe leading to the gathering system.
Connecting a well to the gathering system also includes placing a
``tap'', or break of the gathering pipeline wall at [[Page 5224]] the
point of interconnection with the well-tie pipeline. ``Meter
installation'' as used in the Complaint and this statement, refers to
the construction and installation of metering equipment or facilities,
as well as the construction and installation of the pipe used to
connect the metering equipment to the gathering system. Installation of
meters and associated pipe requires adherence to certain safety
precautions due to the proximity of the meter installation construction
to the existing gas gathering pipeline, as well as the need to minimize
hazards associated with future operations involving a pipe which will
carry natural gas.\1\
\1\Installation may require compliance with standards developed
by the United States Department of Transportation Office of Pipeline
Safety Standards, the American National Standards Institute, the
American Petroleum Institute, the American Society of Mechanical
Engineers and the American Society of Testing and Materials.
---------------------------------------------------------------------------
When a well operator is considering whether to drill a well in a
production area, it must determine first whether the well will be
profitable. In deciding whether to drill, the operator will consider
many factors including the gathering charge, transportation fees and
the amount of money it will have to pay initially for the construction
of the facilities necessary to hook the well to the gathering system.
In an older field such as the San Juan Basin where wells do not
generally produce at high rates, meter installation costs can make the
difference between whether or not a well is drilled, affecting whether
additional natural gas sites are made available to meet consumer
demand.
The Complaint alleges that El Paso forced customers (or ``well
operators'') who needed to purchase El Paso's gathering service to
purchase meter installation services from El Paso as well. The
Complaint also alleges that when contacted, El Paso informs a potential
gathering customer that El Paso will connect a well after the operator
has agreed that El Paso will perform the meter installation associated
with connecting that well to El Paso's system and has prepaid a flat
fee for the installation. El Paso contracts out almost all of this
construction work to other companies in the San Juan Basin and then
charges the customer for the materials, El Paso labor, and
``overheads''. ``Overheads'' account for as much as one third of the
total bill to the customer.
The speed with which a well can be connected to the gathering
system is a significant factor in determining the potential
profitability of that well. Once a well operator has agreed that El
Paso will perform the meter installation, the well operator must rely
on El Paso to schedule that installation. In many instances, El Paso
has taken a significantly longer time to complete meter installation
than it would have taken if the well operator had been able to use an
alternative to El Paso.
Over the past three years, El Paso has permitted only three well
operators, and then only reluctantly, to perform meter installation
using their own contractors, and El Paso's permission in those three
instances extended to only a limited number of well connections. Each
of these operators concluded that they could perform the installation
for substantially less cost than El Paso, even if they had to follow El
Paso's specifications when doing so. These well operators were able to
perform meter installation at each well for nearly one-half of the El
Paso construction cost estimate, thereby saving from $5,000 to $7,000
per well on each of the 121 wells they connected. Since 1991, a total
of 453 wells have been connected to El Paso's gathering system.
However, El Paso predicts that a significantly larger number of wells,
2200 or more, will be connected to its gathering system over the next
five years. If well operators are able to secure like savings, either
from third party competitors or from El Paso responding to the new
competitive environment, then well operators in the San Juan Basin will
likely save from $11 to $15 million dollars over the next five year
period. Depending upon the number of new wells connected over the ten
year life of the proposed Final Judgment, savings could reach the tens
of millions of dollars.
III
Explanation of the Proposed Final Judgment
The proposed Final Judgment is designed to prevent El Paso from
tying the service of meter installation to the provision of gathering
on its San Juan gathering system. The proposed Final Judgment
explicitly prohibits such tying. Section IV(A) provides that El Paso
may not condition the provision of gathering upon a well operator
agreeing to purchase either the metering equipment or its installation
from El Paso.
The proposed Final Judgment does not, however, prohibit El Paso
from providing meter installation in the future. The proposed Final
Judgment, therefore, contains a number of safeguards to ensure that in
the future El Paso makes known to its gathering customers that they
have the option of providing their own meter installation and gives its
customers sufficient information to make a reasoned choice. To this
end, at the time of any initial inquiry concerning gathering and
connection to its gathering system, Section IV(D) of the proposed Final
Judgment requires El Paso to fully disclose to the well operator that
the operator has the option of having someone other than El Paso
provide meter installation. Compliance with this section requires that
El Paso provide the well operator with written notice that the customer
has the right pursuant to this Final Judgment to choose a construction
company other than El Paso; provide an estimate of all charges that El
Paso will require from the well operator, both if the operator selects
El Paso to do the installation and if it does not; provide the operator
with sample copies of the contracts that El Paso will use if the
operator chooses to have El Paso do the installation or selects to have
someone other than El Paso do the meter installation; and, provide a
copy of the specifications, standards, and procedures that El Paso will
require the operator to follow if the operator performs the
installation. With this information, the well operator will be able to
make an informed choice as to whether to use El Paso or another
contractor for meter installation.
The proposed Final Judgment recognizes that El Paso has a
reasonable need to assure the safety and integrity of its gathering
system, and may have some legitimate concerns regarding its liability
when well operators perform meter installations for wells connecting to
its gathering system. Pipe and equipment that connect to El Paso's
gathering pipeline can pose safety hazards if they are constructed in a
substandard manner or with faulty materials.
Section V(E) of the proposed Final Judgment permits El Paso to
protect its safety and liability concerns consistent with the tying
prohibition found in Section IV(A). Connection of the well-tie line
requires a ``tap'' into the gathering pipeline--an actual opening into
the pipe. Welding and other construction of lines carrying natural gas
must be done in a manner that safeguards the workers and the pipe
involved. For this reason, Section V(E) allows El Paso to require well
operators to use El Paso or El Paso contractors for the tap, but limits
the price that El Paso may charge for this service.
In recognition of El Paso's safety and liability concerns, Sections
V(A)-(B) permit El Paso to specify to well operators reasonable
specifications for the construction and installation of metering
facilities. At the same time, these sections also set forth conditions
[[Page 5225]] that limit El Paso's discretion regarding the type of
standards and procedures El Paso may require and the manner in which it
implements these standards and procedures. These limiting conditions
will ensure that El Paso will not use its standard setting practices to
discourage its gathering customers from using other contractors for
meter installation in the future. Thus, specifications that have the
effect of steering well operators to use of El Paso or El Paso-provided
equipment for meter installation would violate this Final Judgment.
Similarly, El Paso has a bonafide interest in providing maintenance
for meter equipment connected to its system because such maintenance is
necessary to assure continuing provision of safe and efficient gas
gathering. For this reason, Section IV(C) of the proposed Final
Judgment allows El Paso to provide maintenance and to recover the cost
for such maintenance, but only in the rate for gathering charged all
gathering customers.
Well operators generally connect new wells again and again over the
years. The proposed Final Judgment prevents El Paso from implementing
practices designed, or having the effect when implemented, to
discourage well operators who elect to perform their own meter
installation from exercising that option again. Thus, although Section
V permits El Paso to set standards and procedures that a well operator
must follow when installing meters connected to El Paso gathering
system, and to require well operators to submit their installations to
inspection by El Paso, it places certain restrictions on El Paso to
assure that its specifications, procedures and inspections do not
impose undue cost or delay.
As a means of monitoring El Paso's conduct with respect to the
requirements it imposes, Section V(C) of the proposed Final Judgment
provides that if El Paso does require meter installation inspections,
its inspectors must create logs of their inspections of both El Paso
and non-El Paso installations. El Paso must maintain these logs and
made them available to well operators that choose to perform their own
meter installation. To assure well operators timely access to these
logs, the proposed Final Judgment (Section IV(E)) requires that any
contract between a well operator and El Paso that provides for meter
installation inspections must also contain a clause giving the well
operator access to inspections records. These well operators will then
be able to examine logs for their installation jobs and compare logs
pertaining to meter installations performed by El Paso to aid in
determining whether El Paso is conducting uniform and reasonable
inspections.
Finally, the Final Judgment (Section IV(E)) requires that El Paso
must give the well operator the unconditional option of including a
clause in the meter installation contract that would permit the well
operator to elect binding arbitration rather than court litigation to
resolve differences under the contract.
The United States is satisfied that the proposed Final Judgment
sufficiently resolves the antitrust violations alleged in the
Complaint. The provisions of the proposed Final Judgment should prevent
any future tying activities, and will allow El Paso to safeguard the
integrity and safety of its own gathering system while at the same time
assuring that those operators who choose to perform their own meter
installation are not indirectly burdened by El Paso for their choice.
Compliance with the proposed Final Judgment would prevent any
recurrence of the violations alleged in the Complaint, and thus
provides complete relief.
IV
Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any
person who has been injured in his business or property as a result of
conduct forbidden by the antitrust laws may bring suit in Federal court
to recover three times the damages suffered, as well as costs and
reasonable attorneys fees. Entry of the proposed Final Judgment will
neither impair nor assist the brining of any private antitrust damage
action. Under the provisions of Section 5(a) of the Clayton Act, 15
U.S.C. Sec. 16(a), the proposed Final Judgment has no prima facie
effect in any subsequent private lawsuit that may be brought.
V
Procedure Available for Modification of the Proposed Final Judgment
The United States and defendant have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least 60 days preceding the
effective date of the proposed Final Judgment within which any person
may submit to the United States written comments regarding the proposed
Final Judgment. Any person who wishes to comment should do so within 60
days of the date of publication of this Competitive Impact Statement in
the Federal Register. The United States will evaluate the comments,
determine whether it should withdraw its consent, and respond to
comments. The comments and the response of the United States will be
filed with the Court and published in the Federal Register.
Written comments should be submitted to: Roger W. Fones, Chief,
Transportation, Energy, and Agriculture Section, Antitrust Division,
Judiciary Center Building, 555 4th Street, N.W., Rm 9104, Washington,
D.C. 20001.
VI
Alternative to the Proposed Final Judgment
The alternative to the proposed Final Judgment would be a full
trial of the case against El Paso. In the view of the Department of
Justice, such a trial would involve substantial cost to the United
States and is not warranted because the proposed Final Judgment
provides relief that will remedy the violations of the Sherman Act
alleged in the United States' Complaint.
VII
Determinative Materials and Documents
There are no materials or documents that the United States
considered to be determinative in formulating this proposed Final
Judgment. Accordingly, none are being filed with this Competitive
Impact Statement.
Dated: January 12, 1995.
Respectfully submitted.
Anne K. Bingaman,
Assistant Attorney General Antitrust Division.
Jade Alice Eaton,
Attorney, U.S. Department of Justice, Antitrust Division,
Transportation, Energy, and Agriculture Section, Judiciary Center
Building, 555 Fourth Street, N.W., Washington, DC 20001. (202) 307-
6316.
Certificate of Service
I hereby certify that I have caused a copy of the foregoing
COMPLAINT, STIPULATION, proposed FINAL JUDGMENT, and COMPETITIVE
IMPACT STATEMENT to be served upon counsel in this matter in the
manner set forth below:
By hand: Mary Anne Mason, Andrews & Kurth, L.L.P., 1701
Pennsylvania Avenue, N.W., Washington, D.C. 20006.
[[Page 5226]] Dated: January 12, 1995.
Jill A. Ptacek,
Antitrust Division, U.S. Department of Justice, 555 4th Street, N.W.,
Washington, D.C. 20001, (202) 307-6607.
[FR Doc. 95-1989 Filed 1-25-95; 8:45 am]
BILLING CODE 4410-01-M