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OIL & GAS: Merger for El Paso

2 minute read
TIME

OIL & GAS

Ever since El Paso Natural Gas Co. decided in 1957 to merge its nearly 8,000-mile transmission pipeline system with the Pacific Northwest Pipeline Corp.’s 1,500-mile system. Washington has been trying to block the deal. The Justice Department quickly slapped an antitrust suit against El Paso. It charged that the merger would reduce competition in supplying gas to the rich West Coast market, even though, at the time, El Paso had simply acquired 99.8% of Pacific’s common stock and was operating the companies separately. El Paso’s President Paul Kayser countered by applying to the Federal Power Commission, which is more sympathetic to producers and pipelines and which shares jurisdiction with the trustbusters.

Last week Kayser’s bypass of the Justice Department paid off. From the FPC came a four-man opinion okaying El Paso’s purchase of Pacific Northwest, making it the biggest gas carrier. FPC acknowledged that there might be a reduction of competition for California customers, and also less competition in buying gas from independent producers. But the commissioners took the stand that it was not particularly significant, because the merged El Paso-Pacific Northwest combine faces new competition in the California market from the Transwestern Pipeline Co., recently authorized to build a $192 million pipeline into the state, and also from a proposed Pacific Gas Transmission Co., which would bring in additional gas from Canada. Any impact on trade by eliminating Pacific Northwest as a competitor, said the commission, is overshadowed by the benefits conferred by the merger. Among these are the fact that Pacific Northwest’s lines will enable El Paso to link up its San Juan Basin, Permian Basin and Panhandle Field with important new sources of Canadian gas. The resulting $1.7 billion supplier, said the commission, will be financially stronger, able to take on new customers, and in a position to grant rate reductions.

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