Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Merger of energy companies conditioned on transfer of gas pipeline interest, (Jun 13, 2016)

By Michael Menzhuber, J.D., LL.M.

In order to settle FTC charges that the proposed acquisition of Williams Companies, Inc. by Energy Transfer Equity, L.P. (ETE) would likely harm competition in Florida, ETE and Williams will divest Williams’ interest in an interstate natural gas pipeline, the agency has announced (In the Matter of Energy Transfer Equity, L.P. and The Williams Companies, Inc., FTC File No. 151-0172).

According to the FTC’s complaint, the proposed merger, initially valued at $37.7 billion, would have reduced competition for "firm" pipeline capacity to deliver natural gas to points within the Florida peninsula. Utilities and customers in Florida are dependent upon pipeline-transported natural gas supply, and Florida Gas Transmission LLC (FGT) and Gulfstream Natural Gas System L.L.C. are the two interstate pipelines that serve the Florida peninsula. Because ETE owns a 50 percent share of FGT and Williams owns a 50 percent share of Gulfstream, the combination of ETE and Williams, as proposed, would increase the price of transporting natural gas to Florida utilities and customers.

The proposed consent order preserves competition between FGT and Gulfstream by requiring Energy Transfer Corp LP (the newly merged company) to:

• divest its interest in Gulfstream to an FTC-approved buyer within 180 days after the acquisition becomes final; and

• maintain Gulfstream as a viable, competitive, and marketable asset until the divesture has been completed.

Future pipeline competition. The FTC’s complaint also alleged that the proposed merger likely would harm future competition from Sabal Trail Transmission LLC, a new interstate pipeline that is scheduled to start transporting natural gas to parts of the Florida peninsula in May 2017. Sabal Trail and its future customers will rely on leased access to Transco Pipeline, a Williams-owned large interstate pipeline, for natural gas supply. The FTC is concerned that the newly-merged company would have an incentive to deny Sabal Trail additional capacity expansions because ETE’s FGT pipeline is a closer competitor to Sabal Trail than was William’s Gulfstream pipeline.

The proposed consent agreement preserves future competition from Sabal Trail by:

• incorporating the terms of a capacity lease agreement that Sabal Trail had reached with Transco prior to William’s acquisition by ETE; and

• requiring ETE to negotiate with Sabal Trail for certain additional expansions of the Transco segment.

The FTC will publish the consent package in the Federal Register shortly. The agreement will be subject to public comment through July 11, 2016, after which a decision will be made on whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the "Supplementary Information" section of the Federal Register notice.

Companies: Energy Transfer Equity, L.P.; The Williams Companies, Inc.

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