Business: Triumph in Gas

What the Department of Justice last week announced as a “major victory” in a war against natural gas monopolies encouraged the “monopoly” in question to invest $8,000,000 in the construction of a 300-mile pipe line to Detroit. Target of the U. S. Government was Columbia Gas & Electric Corp., which supplies manufactured gas, natural gas and electricity to some 1,326 cities and towns in Indiana, West Virginia, Ohio, Kentucky, Pennsylvania, Maryland and New York. Specific allegations involved the relations between Columbia Oil & Gasoline Corp., an affiliate of Columbia Gas & Electric, and Panhandle Eastern Pipe Line Co. This latter company was the major operating unit for Frank P. Parish’s famed Missouri-Kansas Pipe Line Co., which in 1930 thousands of Market speculators referred to as Mo-Kan, at first with affection, later with despair. Promoter Parish planned to pipe natural gas from Amarillo, Tex. to Indianapolis, a distance of some 1,250 miles. Since pipe lines cost! anywhere from $22,000 to $40,000 a mile, Mr. Parish had on his hands a most ambitious undertaking. Running out of funds before his line was completed, he sold a controlling interest in it to Columbia Oil & Gasoline, which bought half of Panhandle’s stock and $20,000,000 of its bonds. Funds for this purchase were borrowed from Columbia Gas & Electric. With this new money, Mr. Parish succeeded in getting his pipe across the Indiana-Illinois line, was still some 60 miles distant from Indianapolis. But his line connected with a Columbia Oil & Gasoline line which in turn connected with the main system of Columbia Gas & Electric.

The Parish line did not prosper. It could not get enough gas customers to produce the volume of business necessary to make it a profitable enterprise. Thereupon the Department of Justice claimed that Columbia Gas & Electric, indirectly controlling the Parish line, was deliberately mismanaging it to keep Texas gas out of Columbia’s home territory. It was charged that Columbia, having seen the invader approach its gates, promptly bought a half interest in him and proceeded to render him innocuous.

Though it denied these charges, Columbia last week signed a consent decree which left the Government with at least the appearance of triumph. In effect, Columbia agreed to get out of the Parish line by separating itself from Columbia Oil & Gasoline. The latter company will be reorganized as an independent concern, having no corporate connection with Columbia Gas & Electric. While this reorganization is in progress, the Parish line stock held by Columbia Oil & Gasoline will be put in the hands of a trustee, Gano Dunn, head of J. G. White Engineering Corp., onetime president of the American Institute of Electrical Engineers. Appointed by the Federal Court as an able & impartial bystander, Mr. Dunn is to have no management duties. Meanwhile, title to the trusteed stock remains in the hands of Columbia Oil & Gasoline, and although Columbia Oil & Gasoline may soon cease to be an affiliate of Columbia Gas & Electric, observers saw no reason to suppose that future relations between the two companies would be anything but amicable. Immediately following the acceptance of the consent decree, Columbia Gas & Electric announced that it would begin work on a new pipe line running from the eastern end of the Parish line to Detroit. This pipe line may be operated under the auspices of Columbia Oil & Gasoline or directly by Columbia Gas & Electric. Another $8,000,000 will be spent on enlarging the capacity of Panhandle Eastern and other existing lines. From Columbia’s standpoint, the new line has two outstanding merits: 1) Detroit is expected to use some 25 billion cubic feet of gas per annum, at a cost of from 33¢ to 35¢ a thousand cubic feet. Detroit’s gas bill would therefore come to some $8,500,000 a year, and this income would turn the Parish line from money-loser to moneymaker. 2) Texas gas would be neatly diverted northward, kept safely away from Columbia’s home grounds.

Signing of the consent decree was thought likely to result in an out-of-court settlement of a $180,000,000 damage suit brought by Mo-Kan receivers against Columbia Gas & Electric. The receivers, like the Government, argued that Columbia had throttled Mo-Kan through abuse of its control of Panhandle. But since Mr. Parish himself took a helpful part in the negotiations leading to the consent decree, it was believed that the $180,000,000 litigation would never face a judge.*

*Still pending are Mo-Kan suits against Standard Oil of New Jersey and Cities Service and others for $150,000,000. Mr. Parish claimed that these companies engineered a bear raid on Mo-Kan stock, caused it to break from $36 a share to $15 a share on June 16, 1930. Mr. Parish had formed Frank P. Parish & Co. to sell shares in Mo-Kan and when the Mo-Kan market collapsed Underwriter Parish was stuck with large blocks of Pipeliner Parish’s shares. Since he was financing his pipeline entirely through stock sales, no more sales meant no more money.