[Federal Register Volume 61, Number 180 (Monday, September 16, 1996)]
[Notices]
[Pages 48697-48704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23558]
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FEDERAL TRADE COMMISSION
[File No. 961-0046]
NGC Corporation; Proposed Consent Agreement With Analysis To Aid
Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair or deceptive acts or practices and unfair methods of
competition, this consent agreement, accepted subject to final
Commission approval, would require, among other things, the Houston,
Texas-based corporation to resign as operator of two Mont Belvieu,
Texas natural gas fractionation plants in which it has an interest. The
agreement resolves charges that NGC's acquisition of certain natural
gas transportation and processing assets from Chevron Corporation would
have left only two companies operating four fractionating plants and
would have extended NGC's control to three of those plants. The
Commission alleged that the acquisition would substantially reduce
competition in violation of federal antitrust laws and, ultimately,
could have led to higher fees for fractionating of natural gas liquids.
DATES: Comments must be received on or before November 15, 1996.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT:
George Cary, Federal Trade Commission, H-374, 6th & Pennsylvania Ave,
NW, Washington, DC 20580. (202) 326-3741.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the
Commission's Rules of Practice (16 CFR 2.34), notice is hereby given
that the following consent agreement containing a consent order to
cease and desist, having been filed with and accepted, subject to final
approval, by the Commission, has been placed on the public record for a
period of sixty (60) days. Public comment is invited. Such comments or
views will be considered by the Commission and will be available for
inspection and copying at its principal office in accordance with
Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR
4.9(b)(6)(ii)).
Agreement Containing Consent Order
The Federal Trade Commission (``Commission'') having initiated an
investigation of the proposed combination involving NGC Corporation
(``NGC'') and certain assets of Chevron Corporation, and it now
appearing that NGC, hereinafter sometimes referred to as ``proposed
respondent,'' is willing to enter into an agreement containing an Order
to divest certain assets, and to cease and desist from certain acts:
It is hereby agreed by and between proposed respondent, by its duly
authorized officers and attorneys, and counsel for the Commission that:
1. Proposed respondent NGC is a corporation organized, existing and
doing business under and by virtue of the laws of the state of
Delaware, with its office and principal place of business located at
13430 Northwest Freeway, Suite 1200, Houston, Texas 77040.
2. Proposed respondent admits all the jurisdictional facts set
forth in the draft of complaint.
3. Proposed respondent waives:
a. any further procedural steps;
b. the requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law;
c. all rights to seek judicial review or otherwise to challenge or
contest the validity of the Order entered pursuant to this agreement;
and
d. any claim under the Equal Access to Justice Act.
4. This agreement shall not become part of the public record of the
proceeding unless and until it is accepted by the Commission. If this
agreement is accepted by the Commission, it, together with the draft of
complaint contemplated thereby, will be placed on the public record for
a period of sixty (60) days and information in respect thereto publicly
released. The Commission thereafter may either withdraw its acceptance
of
[[Page 48698]]
this agreement and so notify the proposed respondent, in which event it
will take such action as it may consider appropriate, or issue and
serve its complaint (in such form as the circumstances require) and
decision, in disposition of the proceeding.
1. This agreement is for settlement purposes only and does not
constitute an admission by proposed respondent that the law has been
violated as alleged in the draft of complaint, or that the facts as
alleged in the draft complaint, other than jurisdictional facts, are
true.
2.This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Sec. 2.34 of the Commission's
Rules, the Commission may, without further notice to the proposed
respondent, (1) issue its complaint corresponding in form and substance
with the draft of complaint and its decision containing the following
Order to divest and to cease and desist in disposition of the
proceeding and (2) make information public with respect thereto. When
so entered, the Ordered to divest and to cease and desist shall have
the same force and effect and may be altered, modified, or set aside in
the same manner and within the same time provided by statute for other
orders. The Order shall become final upon service. Delivery by the
United States Postal Service of the complaint and decision containing
the agreed-to Order to proposed respondent's address as stated in this
agreement shall constitute service. Proposed respondent waives any
right it may have to any other manner of service. The complaint may be
used in construing the terms of the Order, and no agreement,
understanding, representation, or interpretation not contained in the
Order or the agreement may be used to vary or contradict the terms of
the Order.
3. Proposed respondent has read the proposed complaint and Order
contemplated hereby. Proposed respondent understands that, once the
Order has been issued, it will be required to file one or more
compliance reports showing that it has fully compiled with the Order.
Proposed respondent further understands that it may be liable for civil
penalties in the amount provided by law for each violation of the Order
after it becomes final.
Order
I
It is ordered That, as used in this Order, the following
definitions shall apply:
A. ``Combination'' means the transactions contemplated by the
Combination Agreement and Plan of Merger, dated as of May 22, 1996,
among NGC Corporation, Chevron U.S.A. Inc., and Midstream Combination
Corp.
B. ``Commercial Operator'' means the person or entity with the
legal authority to enter into contracts on behalf of a Fractionation
Facility to provide third parties with the service of fractionation for
a fee ans to set the prices offered to third parties for such service.
C. ``Facility Operator'' means any person or entity with the legal
authority to engage in any activity involved in the routine management,
supervision or operation of a Fractionation Facility, including, but
not limited to: the receipt, measurement, handling and storage of raw
natural gas liquids delivered to the Fractionation Facility; the
maintenance, repair and operation of any equipment, machinery or other
assets used in the course of the operation of the Fractionation
Facility; the handling, storage and movement of Specification Products
produced at the Fractionation Facility prior to receipt by a third
party; the purchase and use of material and supplies in connection with
the operation, maintenance and repair of the Fractionation Facility;
the provision of accounting, billing and scheduling functions necessary
for the processing of transactions with Fractionation customers; the
provision of engineering services necessary for operation of the
Fractionation Facility; preparation and submission of any necessary
reports to governmental authorities; the procurement of any necessary
licenses and permits on behalf of the Fractionation Facility; the
purchase of services necessary for the Fractionation Facility's
operation; and the supervision of the implementation of any decision to
expand or modify, repair or maintain the Fractionation Facility.
D. ``Fractionation'' means the process of separating raw natural
gas liquids into specification products.
E. ``Fractionation Facility'' means a facility that separates raw
natural gas liquids into specification products.
F. ``GCF means Gulf Coast Fractionators, a Texas general
partnership.
G. ``GCF'' Expansion Project'' means any current or future project
involving an expenditure for equipment or other capital assets
reasonably necessary to increase the capacity of the GCF Fractionation
Facility beyond its effective capacity level at the time the
expenditure is undertaken.
H. ``GCF Fractionation Facility'' means the Fractionation Facility
owned by GCF located at 1.5 miles west of Highway 146 on FM 1942, Mont
Belvieu, Chambers County, Texas.
I. ``GCF Partnership Agreement'' means the Amended and Restated
Partnership Agreement between Trident NGL, Inc. and Liquid Energy
Corporation and Conoco Inc., effective December 1, 1992.
J. ``MB I'' means Mont Belvieu I, a Fractionation Facility,
originally constructed by Cities Service Company in 1970, located at
9900 FM 1942, Mont Belvieu, Chambers County, Texas.
K. ``MB I Ownership Agreement'' means the Agreement for the
Construction, Ownership and Operation of the Mont Belvieu I
Fractionation Facility between Trident NGL, Inc. and Union Pacific
Fuels, Inc., dated November 17, 1993, and any subsequent amendments
thereof.
L. ``NGC'' means NGC Corporation, its directors, officers,
employees, agents and representatives, predecessors, successors and
assigns; its subsidiaries, divisions, and groups and affiliates
controlled by NGC, and the respective directors, officers, employees,
agents, representatives, successors and assigns of each.
M. ``Property to be Divested'' means NGC's interest in (1) MB I;
and (2) all assets, title, properties, interest, rights and privileges,
of whatever nature, tangible and intangible, and other property of
whatever description and location used in the business of MB I
including, without limitation:
1. All buildings, machinery, fixtures, equipment, vehicles,
pipelines, storage facilities, furniture, tools, supplies, spare parts
and other tangible personal property located in Mont Belvieu, Texas;
2. All rights, title and interest in and to real property located
in Mont Belvieu, Texas, together with appurtenances, licenses, and
permits;
3. All books, records and files;
4. All rights under warranties and guarantees for equipment,
express or implied;
5. All technical information and drawings for equipment;
6. All vendor lists, catalogs, sales promotion literature, and
advertising materials;
7. All inventory of finished goods, work in progress, raw materials
and supplies;
[[Page 48699]]
8. All the option of the Acquirer all rights, title and interests
in and to the contracts and leases entered into in the ordinary course
of business with suppliers, measurement equipment operators, storage
facility operators, transmission pipeline operators, Fractionation
customers and personal property lessors and licensors, pertaining to
the operation of MB I, provided that where third party consent is
required to complete the transfer described in this subparagraph, NGC
shall use best efforts to obtain such third party's consent.
N. ``Specification products'' mean ethane, propane, ethane-propane
mix, iso-butane, normal-butane and natural gasoline.
II
It is further ordered That:
A. Within six (6) months after the signing of the Agreement
Containing Consent Order, NGC shall divest, absolutely and in good
faith, the Property to be Divested. The Property to be Divested shall
be divested only to an acquirer or acquirers that receive the prior
approval of the Commission, and only in a manner that receives the
prior approval of the Commission. The purpose of the divestiture
required by this Order is to ensure the continued operation of MB I in
the Fractionation business in the same manner as conducted by MB I at
the time of the proposed divestiture and to remedy the lessening of
competition alleged in the Commission's complaint.
B. Upon the signing of the Agreement Containing Consent Order, NGC
shall immediately give the requisite six (6) months notice under the MB
I Ownership Agreement of its intent to cease serving as the Commercial
and Facility Operator at MB I. Within thirty (30) days after the
signing of the Agreement Containing Consent Order, NGC shall cease to
serve as the Commercial Operator of MB I, provided the other party to
the MB I Ownership Agreement agrees to be installed as the Commercial
Operator of MB I by that date. In the event that the other party to the
MB I Ownership Agreement has not elected to become the Commercial
Operator within said thirty (30) day period, NGC may continue to serve
as the Commercial Operator of MB I, but shall do so: (i) Under the
provisions of Paragraph 3 of the Hold Separate Agreement (``Hold
Separate''), attached hereto and made a part hereof as Appendix I; and
(ii) only until divestiture contemplated in Paragraph II.A. of this
Order is achieved, provided such divestiture occurs within the six-
month period described therein. If such divestiture does not occur
within said six-month period, NGC shall cease to serve as the
Commercial Operator of MB I by the date on which that six-month period
expires and the provisions of Paragraph III.C. of this Order shall
apply. NGC may continue to serve as Facility Operator of MB I until the
divestiture contemplated in Paragraph II.A. of this Order is achieved,
provided such divestiture occurs within the six-month period described
therein. If such divestiture does not occur within that six-month
period, NGC shall cease to serve as the Facility Operator of MB I by
the date on which that six-month period expires and the provisions of
Paragraph III.C. of this Order shall apply.
C. NGC shall do nothing to prevent, impede or interfere with the
person or entity that succeeds NGC as either the Commercial Operator or
the Facility Operator of MB I in undertaking reasonable efforts to
offer employment to any NGC employee who assists in the performance of
any activities that NGC engages in as the Commercial Operator or
Facility Operator at MB I, respectively.
D. Pending divestiture of the Property to be Divested, NGC shall
take no action impairing the validity and marketability of the Property
to be Divested and shall not cause or permit the destruction, removal,
or impairment of any assets or business of the Property to be Divested,
except in the ordinary course of business and except for ordinary wear
and tear.
E. NGC shall comply with the Agreement to Hold Separate attached to
this Order and made a part thereof (``Hold Separate''). Said Hold
Separate shall continue in effect until NGC has divested the Property
to be Divested or until such other time as the Hold Separate provides.
III
It is further ordered That:
A. If NGC has not divested, absolutely and in good faith and with
the Commission's prior approval, the Property to be Divested as
required by Paragraph II of this Order within six (6) months after the
signing of the Agreement Containing Consent Order, the Commission may
appoint a trustee to divest the Property to be Divested. In the event
the Commission or the Attorney General brings an action pursuant to
Section 5(l) of the Federal Trade Commission Act, or any other statute
enforced by the Commission, NGC shall consent to the appointment of a
trustee in such action. Neither the appointment of a trustee nor a
decision not to appoint a trustee under this Paragraph shall preclude
the Commission or the Attorney General from seeking civil penalties or
any other relief available to it, including a court-appointed trustee,
pursuant to Section 5(l) of the Federal Trade Commission Act, or any
other statute enforced by the Commission, for any failure by NGC to
comply with this Order.
B. If a trustee is appointed by the Commission or a court pursuant
to Paragraph III.A. of this Order, NGC shall consent to the following
terms and conditions regarding the trustee's powers, authorities,
duties and responsibilities:
1. The Commission shall select the trustee, subject to the consent
of NGC, which consent shall not be unreasonably withheld. The trustee
shall be a person with experience and expertise in acquisitions and
divestitures. If NGC has not opposed, in writing, the selection of any
proposed trustee within ten (10) days after notice by the staff of the
Commission to NGC of the identity of any proposed trustee, NGC shall be
deemed to have consented to the selection of the proposed trustee.
2. Subject to the prior approval of the Commission, the trustee
shall have the exclusive power and authority to divest the Property to
be Divested.
3. Within ten (10) days after appointment of the trustee, NGC shall
execute a trust agreement that, subject to the prior approval of the
Commission and, in the case of a court-appointed trustee, of the court,
transfers to the trustee all rights and powers necessary to permit the
trustee to effect the divestiture required by this Order.
4. The trustee shall have twelve (12) months from the date the
Commission approves the trust agreement described in Paragraph III.B.3
to accomplish the divestiture, which shall be subject to the prior
approval of the Commission. If, however, at the end of the twelve-month
period the trustee has submitted a plan of divestiture or believes that
divestiture can be accomplished within a reasonable time, the
divestiture period may be extended by the Commission, or in the case of
a court-appointed trustee, by the court; provided, however, that the
Commission may extend the divestiture period only two (2) times.
5. NGC shall provide the trustee with full and complete access to
the personnel, books, records and facilities relating to the Property
to be Divested, or any other relevant information, as the trustee may
request. NGC shall develop such financial or other information as such
trustee may request and shall cooperate with the trustee. NGC shall
take no action to interfere with or impede the trustee's accomplishment
of the divestiture. Any delays in
[[Page 48700]]
divestiture caused by NGC shall extend the time for divestiture under
this Paragraph in an amount equal to the delay, as determined by the
Commission or for a court-appointed trustee, the court.
6. The trustee shall make reasonable efforts to negotiate the most
favorable price and terms available in each contract that is submitted
to the Commission, subject to NGC's absolute and unconditional
obligation to divest at no minimum price. The divestiture shall be made
in the manner and to the acquires or acquires as set out in Paragraph
II of this Order; provided, however, if the trustee receives bona fide
offers from more than one acquiring entity, and if the Commission
determines to approve more than one such acquiring entity, the trustee
shall divest to the acquiring entity or entities selected by NGC from
among those approved by the Commission.
7. The trustee shall serve, without bond or other security, at the
cost and expense of NGC, on such reasonable and customary terms and
conditions as the Commission or the court may set. The trustee shall
have authority to employ, at the cost and expense of NGC, such
consultants, accountant, attorneys, investment bankers, business
brokers, appraisers, and other representatives and assistants as are
reasonably necessary to carry out the trustee's duties and
responsibilities. The trustee shall account for all monies derived from
the divestiture and all expenses incurred. After approval by the
Commission and, in the case of a court-appointed trustee, by the court,
of the account of the trustee, including fees for his or her services,
all remaining monies shall be paid at the direction of NGC and the
trustee's power shall be terminated. The trustee's compensation shall
be based at least in a significant part on a commission arrangement
contingent on the trustee's divesting the Property to be Divested.
8. NGC shall indemnify the trustee and hold the trustee harmless
against any losses, claims, damages, liabilities, or expenses arising
out of, or in connection with, the performance of the trustee's duties,
including all reasonable fees of counsel and other expenses incurred in
connection with the preparation for, or defense of any claim, whether
or not resulting in any liability, except to the extent that such
liabilities, losses, damages, claims, or expenses result from
misfeasance, gross negligence, willful or wanton acts, or bad faith by
the trustee.
9. If the trustee ceases to act or fails to act diligently, a
substitute trustee shall be appointed in the same manner as provided in
Paragraph III.A. of this Order.
10. The Commission or, in the case of a court-appointed trustee,
the court, may on its own initiative or at the request of the trustee
issue such additional orders or directions as may be necessary or
appropriate to accomplish the divestine required by this Order.
11. The trustee shall have no obligation or authority to operate or
maintain the Property to be Divested.
12. The trustee shall report in writing to NGC and to the
Commission every sixty (60) days concerning the trustee's efforts to
accomplish divestiture.
C. If NGC has not divested, absolutely and in good faith and with
the Commission's prior approval, the Property to be Divested as
required by Paragraph II of this Order within six (6) months after the
signing of the Agreement Containing Consent Order, NGC shall, by such
date: (i) Cease to serve as the Commercial Operator of MB I (assuming
NGC is then serving as Commercial Operator under the provisions of
Paragraph 3 of the Hold Separate); (ii) cease to serve as the Facility
Operator of MB I; and (iii) take all necessary steps under the MB I
Ownership Agreement to install the other party to said Ownership
Agreement as the Commercial Operator and the Facility Operator of MB I.
IV
It is further ordered That:
A. Upon the signing of the Agreement Containing Consent Order, NGC
shall immediately give the requisite six (6) month notice under the GCF
Partnership Agreement of its intent to cease serving as the Commercial
and Facility Operator at GCF. Within thirty (30) days after the signing
of the Agreement Containing Consent Order, NGC shall cease to serve as
the Commercial Operator of GCF, provided a replacement agrees to be
installed as the Commercial Operator of GCF by that date. Within one
hundred and twenty (120) days after the signing of the Agreement
Containing Consent Order, NGC shall cease to serve as the Facility
Operator of GCF, provided a replacement agrees to be installed as the
Facility Operator of GCF by that date. In the event that a replacement
has not elected to assume the activities of the Commercial Operator of
GCF within the thirty (30) day period provided or that a replacement
has not elected to assume the activities of the Facility Operator of
GCF within the one hundred and twenty (120) day period provided, then
the provisions of Paragraph 4 of the Hold Separate shall apply, but
only until six (6) months after the signing of the Agreement Containing
Consent Order. NGC shall, by the end of said six (6) month period: (i)
Cease to serve as the Commercial Operator of GCF (assuming NGC is then
serving as Commercial Operator under the provisions of Paragraph 4 of
the Hold Separate); (ii) cease to serve as the Facility Operator of
GCF; and (iii) take all necessary steps under the GCF Partnership
Agreement to install one of the other parties to said Partnership
Agreement as the Commercial Operator and the Facility Operator of GCF.
B. NGC shall do nothing to prevent, impede or interfere with the
person or entity that succeeds NGC as either the Commercial Operator or
the Facility Operator of GCF in undertaking reasonable efforts to offer
employment to any NGC employees who assist in the performance of any
activities that NGC engages in as the Commercial Operator or as the
Facility Operator at GCF, respectively.
C. In its capacity as a GCF partner, GCF shall sponsor and support
an amendment to the GCF Partnership Agreement to allow any two partners
(together holding at least a 50% ownership interest in GCF) to commit
GCF to undertake a GCF Expansion Project, while providing that a
partner may choose to limit its participation in the costs and benefits
of such Project. Until such time as the GCF Partnership Agreement is so
amended, NGC shall vote in favor of any GCF Expansion Project proposed
by another GCF partner, and furthermore NGC shall take no action to
prevent, block, delay or impede in any way any GCF Expansion Project,
but rather shall provide all reasonable cooperation necessary to
facilitate any such Project sought by other GCF partner or partners;
provided however, that this provision does not obligate NGC to accept
any financial burden or legal responsibility with respect to such GCF
Expansion Project to the extent that such burden or responsibility is
out of proportion to NGC's ownership interest in GCF.
D. Except as permitted in the Hold Separate, NGC shall not
participate in any matter or negotiations pertaining to fractionation
fees or other terms pursuant to which customers other than NGC obtain
fractionation services at GCF.
V
It is further ordered That, for a period of ten (10) years from the
date this Order becomes final, NGC shall not, without providing advance
written notification to the Commission, directly or indirectly, through
subsidiaries,
[[Page 48701]]
partnerships, or otherwise: (i) Acquire any stock, share capital,
equity, or other interest in any concern, corporate or non-corporate,
engaged at the time of such acquisition, or within the two years
preceding such acquisition, in the Fractionation business within ten
(10) miles of Mont Belvieu, Texas, or (ii) become the Commercial
Operator or Facility Operator of any Fractionation Facility within ten
(10) miles of Mont Belvieu, Texas, other than the Fractionation
Facility currently operated by Chevron U.S.A. Inc. Said notification
shall be given on the Notification and Report Form set forth in the
Appendix to Part 803 of Title 16 of the Code of Federal Regulations as
amended (hereinafter referred to as ``the Notification''), and shall be
prepared and transmitted in accordance with the requirements of that
part, except that: no filing fee will be required for any such
notification, notification shall be filed with the Office of the
Secretary of the Commission, notification need not be made to the
United States Department of Justice, and notification is required only
of NGC and not of any other party to the transaction. NGC shall provide
the Notification to the Commission at least thirty (30) days prior to
acquiring any such interest (hereinafter referred to as the ``first
waiting period''). If, within the first waiting period, representatives
of the Commission make a written request for additional information,
NGC shall not consummate the acquisition until twenty (20) days after
substantially complying with such request for additional information.
Early termination of the waiting periods in this paragraph may be
requested and, where appropriate, granted by letter from the
Commission's Bureau of Competition.
Provided, however, that prior notification shall not be required by
this Paragraph V of this Order for:
A. The construction or development by NGC of a new Fractionation
Facility or the installation of NGC as the Commercial Operator or
Facility Operator of any such facility; or
B. The expansion or enhancement of an existing Fractionation
Facility owned by NGC in whole or in part; or
C. Any transaction for which notification is required to be made,
and has been made, pursuant to Section 7A of the Clayton Act, 15 U.S.C.
18a.
VI
It is further ordered That:
A. Within sixty (60) days after the date the Agreement Containing
Consent Order is signed and every sixty (60) days thereafter until NGC
has fully complied with the provisions of Paragraphs II or III of this
Order, NGC shall submit to the Commission a verified written report
setting forth in detail the manner and form in which it intends to
comply, is complying, and has complied with Paragraphs II and III of
this Order. NGC shall include in its compliance reports, among other
things that are required from time to time, a full description of the
efforts being made to comply with Paragraphs II and III of the Order,
including a description of all substantive contacts or negotiations for
the divestiture and the identity of all parties contacted. NGC shall
include in its compliance reports, subject to any legally recognized
privilege, copies of all written communications to and from such
parties, all internal memoranda, and all reports and recommendations
concerning divestiture.
B. One (1) year from the date this Order becomes final, annually
for the next nine (9) years on the anniversary of the date this Order
becomes final, and at other times as the Commission may require, NGC
shall file a verified written report with the Commission setting forth
in detail the manner and form in which it has complied and is complying
with Paragraphs IV and V of this Order. Such reports shall include, but
not be limited to, a listing by name and location of all Fractionation
Facilities in the Mont Belvieu, Texas, in which NGC has any ownership
interest, including but not limited to ownership interest obtained due
to default, foreclosure proceedings or purchases in foreclosure, made
by NGC during the twelve (12) months preceding the date of the report.
VII
It is further ordered That, for a period of ten (10) years from the
date this Order becomes final, NGC shall notify the Commission at least
thirty (30) days prior to any proposed change in its organization that
may affect compliance obligations under this Order, such as
dissolution, assignment or sale resulting in the emergence of a
successor, or the creation or dissolution of subsidiaries, or any other
change that may affect compliance obligations under this Order.
VIII
It is further ordered That, for the purpose of determining or
securing compliance with this Order, subject to any legally recognized
privilege, upon written request with reasonable notice to NGC made to
its principal officer, NGC shall permit any duly authorized
representative or representatives of the Commission:
A. Access, during the office hours of NGC and in the presence of
counsel, to inspect and copy all books, ledgers, accounts,
correspondence, memoranda and other records and documents in the
possession or under the control of NGC relating to any matters
contained in this Order; and
B. Upon five (5) days' notice to NGC and without restraint or
interference therefrom, to interview officers or employees of NGC, who
may have counsel present, regarding such matters.
IX
It is further ordered That this Order shall terminate twenty (20)
years from the date this Order becomes final.
Appendix I
Agreement To Hold Separate
This Agreement to Hold Separate (``Hold Separate'') is by and
between NGC Corporation (``NGC''), a corporation organized and existing
under the laws of the state of Delaware, with its office and principal
place of business located at 13430 Northwest Freeway, Suite 1200,
Houston, Texas 77040, and the Federal Trade Commission (the
``Commission''), an independent agency of the United States Government,
established under the Federal Trade Commission Act of 1914, as amended,
15 U.S.C. 41, et seq. (collectively, the ``Parties'').
Premises
Whereas, on or about May 22, 1996, NGC entered into a Combination
Agreement and Plan of Merger with Chevron U.S.A. Inc., a subsidiary of
Chevron Corporation (``Chevron''), and Midstream Combination Corp.,
which contemplates certain transactions (hereinafter, such transactions
collectively referred to as ``the Proposed Combination''); and
Whereas, NGC and Chevron both operate fractionation facilities in
Mont Belvieu, Texas; and
Whereas, the Commission is now investigating the Proposed
Combination to determine whether it would violate any of the statutes
enforced by the Commission; and
Whereas, if the Commission accepts the Agreement Containing Consent
Order (``Consent Agreement''), the Commission must place the Consent
Agreement on the public record for public comment for a period of at
least sixty (60) days and may subsequently withdraw such acceptance
pursuant to the provisions of Section 2.34 of the Commission's Rules;
and
Whereas, the Commission is concerned that if an understanding is
not reached preserving competition
[[Page 48702]]
during the period prior to the final issuance of the Consent Agreement
by the Commission (after the 60-day public notice period), there may be
interim competitive harm, and relief resulting from a proceeding
challenging the legality of the Proposed Combination might not be
possible, or might be less than an effective remedy; and
Whereas, the Commission is concerned that if the Proposed
Combination is consummated, it will be necessary to preserve the
Commission's ability to require the divestiture of the Properties to be
Divested as described in Paragraph I of the Consent Order and the
Commission's right to seek to restore the NGC and Chevron fractionation
businesses at Mont Belvieu, Texas as independent, viable competitors;
and
Whereas, the purpose of this Hold Separate and the Consent
Agreement is to:
(i) preserve the Property to be Divested as a viable independent
business pending its divestiture as a viable and ongoing enterprise;
(ii) remedy any anticompetitive effects of the Proposed
Combination; and
(iii) preserve the Property to be Divested as an ongoing,
competitive entity engaged in the same business in which it is
presently employed until divestiture is achieved; and
Whereas, NGC's entering into this Hold Separate shall in no way be
construed as an admission by NGC that the Proposed Combination
constitutes a violation of any statute; and
Whereas, NGC understands that no act or transaction contemplated by
this Hold Separate shall be deemed immune or exempt from the provisions
of the antitrust laws or the Federal Trade Commission Act by reason of
anything contained in this Agreement.
Now, therefore, the parties agree, upon the understanding that the
Commission has not yet determined whether the Proposed Combination will
be challenged, and in consideration of the Commission's agreement that,
at the time it accepts the Consent Agreement for public comment it will
grant early termination of the Hart-Scott-Rodino waiting periods for
any transactions that are part of the Proposed Combination and are
subject to any Hart-Scott-Rodino waiting period that has not yet
expired, and unless the Commission determines to reject the Consent
Agreement, it will not seek further relief from NGC with respect to the
Proposed Combination, except that the Commission may exercise any and
all rights to enforce this Hold Separate, the Consent Agreement to
which it is annexed and made a part thereof, and the Order contained
therein, once it becomes final, and in the event that the required
divestiture is not accomplished, to seek divestiture of the Property to
be Divested, and other relief, as follows:
1. NGC agrees to execute and be bound by the Consent Agreement;
2. NGC agrees that from the date of its signing of the Consent
Agreement until the earliest of the dates listed in subparagraphs 2.a-
2.c, it will comply with the provisions of paragraphs 3, 4, 5 and 6 of
this Hold Separate:
a. three business days after the Commission withdraws its
acceptance of the Consent Agreement pursuant to the provisions of
Section 2.34 of the Commission's Rules;
b. 120 days after publication in the Federal Register of the
Consent Agreement, unless by that date the Commission has finally
accepted such Agreement;
c. the day after the divestitures required by the Consent Agreement
have been completed.
3. With respect to the Fractionation Facility located in the city
of Mont Belvieu, Chambers County, Texas, partially owned by NGC and
known as Mont Belvieu I (``MB I''), NGC agrees to cease serving as the
Commercial Operator within thirty days (30) after signing the Consent
Agreement, provided that the other party to the MB I Ownership
Agreement agrees to be installed as the Commercial Operator of MB I by
that date. In the event that the other party to the MB I Ownership
Agreement has not elected to become the Commercial Operator within said
thirty (30) day period, NGC will hold its interests in the assets and
business of MB I separate and apart on the following terms and
conditions;
a. NGC's rights, obligations and duties as the Commercial Operator
of MB I shall be exclusively administered by David Rook. All NGC
employees who are necessary to perform, or in any way assist in the
performance of, any of the activities of the Commercial Operator of MB
I shall report to Mr. Rook, and NGC shall provide the Commission with a
list of all such employees, together with a full description of the
assigned duties of each listed employee and an explanation of how such
duties are necessary for the effective functioning of the Commercial
Operator of MB I, which list shall be updated whenever its membership
or any member's assigned duties change. NGC shall have no authority to
remove Mr. Rook nor any other NGC employee thus assigned to report to
him, except for cause.
b. Except as provided by this Hold Separate, neither Mr. Rook nor
any employee of NGC named in the list required in Paragraph 3.a. above
shall disclose any confidential information concerning MB I to an NGC
employee not named on any such list or use confidential information for
any purpose other than in the performance of that employee's assigned
duties enumerated in the list required in Paragraph 3.a. above. Said
employees shall enter a confidentiality agreement prohibiting
disclosure of confidential information. Neither Mr. Rook nor any NGC
employee assigned to report to him pursuant to this Hold Separate shall
participate in any business decision or attempt to influence any such
decision involving any other Fractionation Facility in which NGC has an
interest. Neither Mr. Rook nor any NGC employees assigned to report to
him pursuant to this Hold Separate shall have access to any
confidential information concerning any other Fractionation Facility in
which NGC has an interest. Meetings of the MB I Management Committee
during the term of this Hold Separate shall be stenographically
transcribed and the transcripts retained for two (2) years after the
termination of this Hold Separate; and
c. NGC shall do nothing to prevent, impede or interfere with the
person or entity that succeeds NGC as either the Commercial Operator or
the Facility Operator of MB I in undertaking reasonable efforts to
offer employment to any NGC employees who assist in the performance of
any activities that NGC engages in as the Commercial Operator at MB I
or as the Facility Operator at MB I, respectively.
4. With respect to the Fractionation Facility located in the city
of Mont Belvieu, Chambers County, Texas, and owned by a partnership
known as Gulf Coast Fractionators (``GCF'') in which NGC is a partner,
NGC agrees to cease serving as the Commercial Operator within thirty
(30) days after signing the Consent Agreement, provided a replacement
agrees to be installed as the Commercial Operator of GCF by that date.
Within one hundred and twenty (120) days after the signing of the
Consent Agreement, NGC shall cease to serve as the Facility Operator of
GCF, provided a replacement agrees to be installed as the Facility
Operator of GCF by that date. In the event that a replacement has not
elected to assume the activities of the Commercial Operator of GCF
within the thirty (30) day period provided or that a replacement has
not elected to assume the activities of the Facility Operator of GCF
within the one hundred and twenty (120) day period provided, NGC will
hold its interests in the assets and
[[Page 48703]]
business of GCF separate and apart on the following terms and
conditions:
a. NGC's rights, obligations and duties as the Commercial Operator
of GCF, in the first instance, and as the Facility Operator, of GCF, in
the second instance, shall be exclusively administered by an NGC
designee. In either instance, all NGC employees who are necessary to
perform, or in any way assist in the performance of, any of the
activities being administered by said designee shall report to said NGC
designee, and NGC shall provide the Commission with a list of all such
employees, together with a full description of the assigned duties of
each listed employee and an explanation of how such duties are
necessary for the effective functioning of, in the first instance, the
Commercial Operator of GCF, and in the second instance, the Facility
Operator of GCF, which list shall be updated whenever its membership or
any member's assigned duties changes. NGC shall have no authority to
remove its designee or any other NGC employee thus assigned to report
to said designee, except for cause.
b. Except as provided by this Hold Separate, neither the NGC
designee to be identified pursuant to Paragraph 4.a. above nor any
employee of NGC named in the list required by Paragraph 4.a. above
shall disclose any confidential information concerning GCF to an NGC
employee not named on any such list or use confidential information for
any purpose other than in the performance of that employee's assigned
duties enumerated in the list required in Paragraph 4.a. above. Said
employees shall enter a confidentiality agreement prohibiting
disclosure of confidential information. Neither the NGC designee nor
any NGC employee assigned to report to this individual pursuant to this
Hold Separate shall participate in any business decision or attempt to
influence any such decision involving any other Fractionation Facility
in which NGC has an interest. Neither the NGC designee nor any NGC
employees assigned to report to him pursuant to this Hold Separate
shall have access to any confidential information concerning any other
Fractionation Facility in which NGC has an interest. Meetings of the
GCF Management Committee during the term of this Hold Separate shall be
stenographically transcribed and the transcripts retained for two (2)
years after the termination of this Hold Separate.
5. With respect to GCF, NGC further agrees:
a. To do nothing to prevent, impede or interfere with the person or
entity that succeeds NGC as either the Commercial Operator or the
Facility Operator of GCF in undertaking reasonable efforts to offer
employment to any NGC employees who assist in the performance of any
activities that NGC engages in as the Commercial Operator at GCF or as
the Facility Operator at GCF, respectively; and
b. In its capacity as a GCF partner, NGC shall sponsor and support
an amendment to the GCF Partnership Agreement to allow any two partners
(together holding at least a 50% ownership interest in GCF) to commit
GCF to undertake a GCF Expansion Project, while providing that a
partner may choose to limit its participation in the costs and benefits
of such Project. Until such time as the GCF Partnership Agreement is so
amended, NGC shall vote in favor of any GCF Expansion Project proposed
by another GCF partner, and furthermore NGC shall take no action to
prevent, block, delay or impede in any way any GCF Expansion Project,
but rather shall provide all reasonable cooperation necessary to
facilitate any such Project sought by other GCF partner or partners,
provided however, that this provision does not obligate NGC to accept
any financial burden or legal responsibility with respect to such GCF
Expansion Project to the extent that such burden or responsibility is
out of proportion to NGC's ownership interest in GCF; and
c. Except as permitted in this Hold Separate, NGC shall not
participate in any matter or negotiations pertaining to fractionation
fees or other terms pursuant to which customers other than NGC obtain
fractionation services at GCF.
6. From the date of the signing of the Consent Agreement, NGC shall
take no action impairing the viability and marketability of the
Property to be Divested and shall not cause or permit the destruction,
removal, or impairment of any asset or business of the Property to be
Divested, except in the ordinary course of business and except for
ordinary wear and tear. From the date of the signing of the Consent
Agreement, NGC shall take no action that would in any manner impair,
impede or restrict its ability to comply with any provision of the
Consent Agreement.
7. NGC waives all rights to contest the validity of this Hold
Separate.
8. For the purpose of determining or securing compliance with this
Hold Separate, subject to any legally recognized privilege, and upon
written request with reasonable notice to NGC made to its principal
office, NGC shall permit any duly authorized representative or
representative of the Commission.
a. Access, during the office hours of NGC and in the presence of
counsel, to inspect and copy all books, ledgers, accounts,
correspondence, memoranda, and other records and documents in the
possession or under the control of NGC relating to compliance with this
Hold Separate; and
b. Upon five (5) days' notice to NGC and without restraint or
interference from it but in the presence of its counsel, to interview
officers or employees of it regarding any such matters.
9. Should the Federal Trade Commission seek in any proceeding to
compel NGC to divest itself of the Property to be Divested under the
Consent Agreement, or any other assets that it may hold, or to seek any
other injunctive or equitable relief, NGC shall not raise any objection
based upon the expiration of the applicable Hart-Scott-Rodino Antitrust
Improvements Act waiting period or the fact that the Commission has
permitted the Proposed Combination. NGC also waives all rights to
contest the validity of this Hold Separate.
10. This Hold Separate shall be binding upon NGC upon the signing
of the Consent Agreement. NGC agrees that should it violate any of the
provisions of this Hold Separate, it is subject to the payment of up to
ten thousand dollars ($10,000) for each such violation. NGC also agrees
that the violation of any of the provisions of this Hold Separate may
subject NGC to such other and further equitable relief as a United
States district court may deem appropriate to grant.
NGC Corporation.
C.L. Watson,
President and Chief Executive Officer.
Federal Trade Commission.
Stephen Calkins,
General Counsel.
Analysis To Aid Public Comment on the Provisionally Accepted
Consent Order
The Federal Trade Commission has accepted for public comment from
NGC Corporation (``NGC''), an agreement containing a consent order. The
agreement is designed to remedy any anticompetitive effects stemming
from NGC's acquisition of certain assets from Chevron Corporation
(``Chevron'').
This agreement has been placed on the public record for sixty (60)
days for reception of comments from interested persons. Comments
received during this period will become part of the public record.
After sixty (60) days, the Commission will again review the agreement
and the comments received, and will decide whether it should
[[Page 48704]]
withdraw from the agreements or make final the order contained in the
agreement.
The Commission's Complaint charges that on or about May 22, 1996,
NGC agreed to acquire certain assets owned by Chevron's subsidiary,
Chevron U.S.A. Inc. (``Chevron USA''). Among the Chevron assets that
NGC agreed to acquire is the fractionation facility at Mont Belvieu,
Texas operated by the Warren Petroleum Company division (``Warren'') of
Chevron USA. The Commission has reason to believe that the acquisition,
as well as the agreement to enter into the acquisition, may have
anticompetitive effects and be in violation of Section 7 of the Clayton
Act and Section 5 of the Federal Trade Commission Act.
According to the Commission's Complaint, NGC and Chevron are direct
competitors in the market for the fractionation of natural gas liquids
at Mont Belvieu, Texas. The Complaint alleges that this market is
highly concentrated and entry is difficult or unlikely. The Commission
was concerned that the acquisition may reduce competition in the Mont
Belvieu fractionation market, by eliminating the direct competition
between NGC and Chevron, by increasing the likelihood that NGC will
unilaterally exercise market power, and by increasing the likelihood
of, or facilitating, collusive or coordinated interaction among the few
remaining significant competitors. Consequently, the acquisition may
lead to anticompetitive increases in fractionation prices.
Typically, in the purification of natural gas (i.e., methane), a
liquefied stream of certain heavier hydrocarbon compounds, called raw
mix natural gas liquids, is also produced. Fractionation is the process
of separating raw mix natural gas liquids into certain discrete,
highly-marketable chemical commodities (i.e., ethane, propane, ethane-
propane mix, iso-butane, normal-butane and natural gasoline), called
natural gas liquids specification products. Natural gas liquids
specification products are ultimately used in the manufacture of
petrochemicals, in the refining of gasoline, and as bottled fuel, among
other uses.
The Commission's investigation of this matter found potential
anticompetitive problems for producers of raw mix who obtain
fractionation services at Mont Belvieu, Texas. Mont Belvieu is the
nation's hub for the fractionation of raw mix natural gas liquids and
the subsequent sale of fractionated specification products. Producers
of raw mix natural gas liquids throughout much of Texas, New Mexico,
western Wyoming and western Colorado have no good alternative to Mont
Belvieu for their fractionation needs. There are only a few facilities
providing fractionation services in Mont Belvieu, among them are
Chevron's Warren facility and two partially owned by NGC--Mont Belvieu
I (``MB I'') and Gulf Coast Fractionators (``GCF'').
The agreement containing consent order is designed to remedy the
Commission's competitive concern about the acquisition. Under the terms
of the proposed order, NGC must divest its interest in MB I within six
months to a purchaser approved by the Commission. If NGC fails to
complete the divestiture within the six months, the Commission may
appoint a trustee to undertake the task. With respect to GCF, NGC is
required to give up its management role and to refrain from
participating in future decisions on pricing or capital expansion.
Since NGC will be permitted to retain its minority interest in GCF,
after the acquisition NGC will still own interests in two fractionation
facilities. However, NGC will have little incentive to operate Warren
in a less-than-competitive manner in the expectation of benefitting
from higher prices at GCF. Because most of GCF's capacity is already
accounted for by long-term contracts at fixed formula prices and by
NGC's captive production, GCF will have little opportunity to raise its
prices. The proposed divestitures of MB I and of management
responsibility at GCF will actually increase from three to four the
number of plant operators in this market, thus increasing the number of
independent decision makers.
To minimize the possibility of competitive harm in the period prior
to the divestiture, the proposed order requires that NGC terminate all
its commercial and facility operator activities at both MB I and GCF
within six months. In the interim, NGC must transfer all its commercial
operator activities at both MB I and GCF to third parties within 30
days or assign those activities to NGC employees who would then serve
under the terms of a Hold Separate Agreement designed to ensure that MB
I and GCF function as independent, competitive businesses. To further
ensure that MB I and GCF function independently, the proposed order
requires NGC to transfer all its facility operator activities at MB I
to a third party within 120 days or assign those activities to
employees who would then serve under this Hold Separate Agreement.
Furthermore, the proposed order requires that NGC not prevent,
impede or interfere with efforts by the successor operators at MB I and
GCF from hiring the current NGC employees who perform any of the
commercial or facility operator duties at the two plants. The proposed
order also requires that, NGC in its ongoing role as a partner in GCF:
(i) Obtain an amendment to the GCF partnership agreement allowing any
two partners (with at least 50% ownership interest in GCF) to undertake
a capacity expansion of GCF; and (ii) abstain from participation in any
matter involving the terms of fractionation service contracts offered
to third-party customers. For a period of ten (10) years from the date
that the order becomes final, the order would require prior Commission
notification before NGC could acquire any interest in, or operatorship
of, an existing fractionation facility within ten (10) miles of Mont
Belvieu, Texas.
The purpose of this analysis is to invite public comment concerning
the consent order. This analysis is not intended to constitute an
official interpretation of the agreement and order or to modify their
terms in any way.
Donald S. Clark,
Secretary.
[FR Doc. 96-23558 Filed 9-13-96; 8:45 am]
BILLING CODE 6750-01-M