[Federal Register Volume 69, Number 159 (Friday, October 8, 2004)]
[Notices]
[Pages 60392-60394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-22697]


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FEDERAL TRADE COMMISSION

[File No. 041 0039]


Enterprise Products Partners L.P., et al.; Analysis To Aid Public 
Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before October 29, 2004.

ADDRESSES: Comments should refer to ``Enterprise Products Partners 
L.P., et al., File No. 041 0039,'' to facilitate the organization of 
comments. A comment filed in paper form should include this reference 
both in the text and on the envelope, and should be mailed or delivered 
to the following address: Federal Trade Commission/Office of the 
Secretary, Room H-159, 600 Pennsylvania Avenue, NW., Washington, DC 
20580. Comments containing confidential material must be filed in paper 
form, as explained in the Supplementary Information section. The FTC is 
requesting that any comment filed in paper form be sent by courier or 
overnight service, if possible, because U.S. postal mail in the 
Washington area and at the Commission is subject to delay due to 
heightened security precautions. Comments filed in electronic form 
(except comments containing any confidential material) should be sent 
to the following e-mail box: [email protected].

FOR FURTHER INFORMATION CONTACT: Frank Lipson, FTC, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-2617.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Section 2.34 
of the Commission's Rules of Practice, 16 CFR 2.34, notice is hereby 
given that the above-captioned 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 thirty (30) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for September 30, 2004), on the World Wide Web, at http://www.ftc.gov/os/2004/09/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Written comments must be submitted 
on or before October 29, 2004. Comments should refer to ``Enterprise 
Products Partners L.P., et al., File No. 041 0039,'' to facilitate the 
organization of comments. A comment filed in paper form should include 
this reference both in the text and on the envelope, and should be 
mailed or delivered to the following address: Federal Trade Commission/
Office of the Secretary, Room H-159, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. If the comment contains any material for which 
confidential treatment is requested, it must be filed in paper (rather 
than electronic) form, and the first page of the document must be 
clearly labeled ``Confidential.'' \1\ The

[[Page 60393]]

FTC is requesting that any comment filed in paper form be sent by 
courier or overnight service, if possible, because U.S. postal mail in 
the Washington area and at the Commission is subject to delay due to 
heightened security precautions. Comments filed in electronic form 
should be sent to the following e-mail box: [email protected].
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    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from Enterprise Products Partners L.P. (``Enterprise'') 
and Dan L. Duncan (``Duncan''), the ultimate parent entity of 
Enterprise. (Enterprise and Duncan are hereinafter referred to 
collectively as ``Respondents.'') The Consent Agreement contains a 
Decision and Order (''Consent Order'') that is designed to remedy the 
anticompetitive effects of the proposed merger between Enterprise and 
GulfTerra Energy Partners L.P. (''GulfTerra''). Under the terms of the 
Consent Agreement, Respondents must divest (1) their interest in one of 
two competing pipelines that transport natural gas from the deepwater 
regions of the Gulf of Mexico and (2) their interest in one of two 
competing underground propane storage and terminaling facilities 
serving the Dixie Pipeline in Hattiesburg, Mississippi. The Consent 
Agreement also contains an Order to Hold Separate and to Maintain 
Assets (``Hold Separate Order'') which, among other things, is designed 
to preserve the viability, marketability and competitiveness of the 
assets to be divested under the proposed Consent Order.
    The proposed Consent Agreement has been placed on the public record 
for thirty days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After thirty days, the Commission will again review the Consent 
Agreement and any comments received and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
Consent Order.

I. The Complaint

    Pursuant to certain agreements dated December 15, 2003 (as 
amended), Enterprise, a publicly traded limited partnership that 
provides midstream energy services to customers throughout the 
Southeastern and Midwestern United States, proposes to merge with 
GulfTerra in a transaction that will create a midstream energy 
partnership with an estimated enterprise value of approximately $13 
billion. The Commission's complaint (``Complaint'') alleges that the 
proposed merger would violate Section 7 of the Clayton Act, as amended, 
15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as 
amended, 15 U.S.C. 45, in the markets for (1) pipeline transportation 
of natural gas from the West Central Deepwater region of the Gulf of 
Mexico (``West Central Deepwater'' market) and (2) propane storage and 
terminaling services in Hattiesburg, Mississippi. The West Central 
Deepwater region of the Gulf of Mexico encompasses the East Breaks, 
Garden Banks, Keithley Canyon and Alaminos Canyon areas in the Gulf of 
Mexico, areas defined by the United States Department of Interior 
Minerals Management Service. These areas are in the ``deepwater'' part 
of the Gulf of Mexico farther from shore, in which water depths exceed 
1000 feet. The proposed Consent Agreement would remedy the alleged 
violations by restoring the lost competition that would result from the 
merger in each of these markets.

II. The Consent Agreement

A. Pipeline Transportation of Natural Gas

    The Gulf of Mexico accounts for nearly one quarter of the natural 
gas supplies in the United States. Natural gas producers ship their 
production out of the Gulf of Mexico to the Gulf Coast via pipelines. 
Enterprise and GulfTerra are direct and substantial competitors in the 
market for pipeline transportation of natural gas from the West Central 
Deepwater.
    Enterprise owns a 50 percent ownership interest in the Starfish 
Pipeline Company, LLC (``Starfish''), which owns the Stingray/Triton 
pipeline system in the West Central Deepwater market. Shell Gas 
Transmission (``Shell'') owns the remaining 50 percent interest in 
Starfish and exercises operational and management control over the 
Starfish assets. However, because the operating agreement provides that 
Enterprise must approve any commercial gas transportation agreements 
proposed by Shell with respect to Starfish, Enterprise effectively 
controls the competitive decisions of Starfish and the Stingray/Triton 
pipeline system. GulfTerra owns the High Island Offshore System 
(``HIOS'') and its accompanying East Breaks lateral, which compete 
directly for pipeline transportation business in the West Central 
Deepwater market with Starfish's Stingray/Triton pipeline system.
    The West Central Deepwater market is highly concentrated. The 
assets controlled wholly or in part by GulfTerra and Enterprise account 
for two of the three pipelines providing natural gas pipeline 
transportation services to the market. Combined, these two pipeline 
systems would control 60 percent of the natural gas pipeline capacity 
in the West Central Deepwater market. The proposed merger would 
substantially increase industry concentration in this already highly 
concentrated market. Moreover, new entry into the pipeline 
transportation of natural gas from the West Central Deepwater market 
entails substantial sunk costs and is highly unlikely to constrain any 
post-merger exercise of market power by Respondents in the relevant 
market. By eliminating the actual, direct, and substantial competition 
that exists between Enterprise and GulfTerra in this market, the 
proposed merger would be substantially likely to cause significant 
competitive harm to producers of natural gas who must purchase pipeline 
transportation services in the West Central Deepwater market.
    The proposed Consent Order remedies the merger's alleged 
anticompetitive effects in the West Central Deepwater market by 
requiring that Respondents divest either (1) their 50 percent interest 
in Starfish, (the ``Starfish Interest'') or (2) the HIOS/East Breaks 
pipeline system, (the ``HIOS/East Breaks Assets.''). If Respondents 
fail to divest either of these competing pipeline assets on or before 
March 31, 2005, the Commission may appoint a Divestiture Trustee to 
divest either of the above referenced pipeline assets.

[[Page 60394]]

B. Propane Storage and Terminaling Services

    Propane is used as a heating fuel during the winter months in much 
of the Southeastern United States. Propane marketers generally purchase 
propane from the major supply sources in Texas and Louisiana and ship 
that propane eastward over the Dixie Pipeline System (``Dixie''), the 
only common carrier propane pipeline in the Southeast. Because of 
certain physical and capacity constraints on Dixie west of Baton Rouge, 
Louisiana, the segments of Dixie west of Baton Rouge are often full 
(capacity constrained) during the winter months. Therefore, propane 
shippers along Dixie often must purchase propane during the spring and 
summer (non-peak) seasons, ship it eastward on Dixie and store the 
propane at locations east of Baton Rouge, such as Hattiesburg, 
Mississippi (``Hattiesburg''). This enables these propane marketers to 
access Dixie's unconstrained capacity during the winter months to meet 
the peak demand of their customers for heating fuel.
    Hattiesburg is the site of massive, naturally occurring underground 
salt domes, which when leached out, provide economic storage capacity 
for propane. The salt domes and associated terminaling facilities 
located at Hattiesburg receive propane from Dixie during the non-peak 
months and then re-inject propane into Dixie during the winter heating 
season. Dixie shippers and other propane marketers pay significant fees 
to the owners of propane storage facilities for the right to store 
propane at Hattiesburg and inject it into Dixie. Enterprise and 
GulfTerra are direct and substantial competitors in providing propane 
storage and terminaling services in Hattiesburg. Enterprise currently 
owns a 50 percent undivided interest in a propane storage and 
terminaling facility located in Hattiesburg (with Dynegy Midstream 
Services, L.P. owning the other 50 percent interest). Enterprise also 
owns a 100 percent interest in a second propane storage facility 
located in nearby Petal, Mississippi. GulfTerra currently owns and 
operates a wholly owned propane storage and terminaling facility in 
Hattiesburg.
    The market for propane storage and terminaling services in 
Hattiesburg is highly concentrated, with Enterprise and GulfTerra 
currently controlling approximately 53 percent of propane storage 
capacity in that market. The proposed merger would leave Respondents 
with an ownership interest in three of the four propane storage and 
terminaling facilities located in Hattiesburg and substantially 
increase concentration in an already highly concentrated market. Entry 
into the market for propane storage and terminaling services requires 
substantial sunk costs and such entry is highly unlikely in response to 
a post-merger increase in propane storage and terminaling fees at 
Hattiesburg. By eliminating the actual, direct, and substantial 
competition that exists between Enterprise and GulfTerra in the 
relevant market, the proposed merger would be substantially likely to 
cause significant competitive harm to propane marketers who would 
likely incur increased prices and fees for propane storage and 
terminaling services in Hattiesburg. These increased costs would likely 
be passed on to propane customers supplied from Hattiesburg.
    The proposed Consent Order remedies the alleged anticompetitive 
effect of this merger in the propane storage and terminaling services 
market in Hattiesburg by requiring that Respondents divest either (1) 
their undivided 50 percent interest in the facility Enterprise co-owns 
with Dynegy, (the ``Enterprise Propane Storage Interest,'') or (2) 
their wholly owned Hattiesburg propane storage facility (the 
``Enterprise Petal LPG Storage Facility''). If Respondents fail to 
divest either of these competing propane storage and terminaling assets 
on or before December 31, 2004, the Commission may appoint a 
Divestiture Trustee to divest either of the above referenced assets. 
The December 31, 2004 deadline for the divestiture of the specified 
propane storage and terminaling assets of Respondents at Hattiesburg is 
designed to assure that a new owner of the divested assets will be in 
place prior to the 2005-06 propane storage contract season, which 
begins in April 2005.
    The Commission believes that divestiture by Respondents of their 
partially owned assets in each market to a Commission-approved 
purchaser would restore competition in each of the two markets 
potentially affected by the merger. However, as certain third parties 
have contractual rights that may impact on Respondents' ability to 
transfer such partially owned assets, or that may affect or delay the 
timing of any such transfer, the proposed Consent Order gives 
Respondents the option of divesting either their partially owned assets 
or their wholly owned assets in each relevant market by the dates 
specified in the proposed Consent Order.

III. The Hold Separate Order

    Because the Consent Agreement would allow the merger to proceed 
prior to the completion of each of the required divestitures, the 
Consent Agreement contains a Hold Separate Order covering the Starfish 
Interest and the Enterprise Propane Storage Interest. The purpose of 
the Hold Separate Order is to ensure that the Starfish Interest and the 
Enterprise Storage Propane Interest operate independently from 
Enterprise and GulfTerra pending the divestitures required under the 
proposed Consent Order. The Hold Separate Order is also intended to 
ensure the continuing viability, marketability, and competitiveness of 
these partially owned assets until they are divested.
    The Commission has appointed Richard J. Black as a monitor to 
oversee the management and operations of the Starfish Interest and the 
Enterprise Propane Storage Interest until the divestitures required by 
the Consent Order are complete. Mr. Black has more than 15 years of 
relevant experience in the midstream energy services business, 
including experience in pipeline transportation of natural gas in the 
deepwater regions of the Gulf of Mexico and in the marketing and sale 
of natural gas liquids.
    To assure that the Commission remains informed about the status of 
the required divestitures, the proposed Consent Order requires 
Respondents to file reports with the Commission periodically until the 
divestitures required under the Consent Order are accomplished. The 
Hold Separate Order will remain in effect until the Respondents or the 
Divestiture Trustee successfully divests the assets required to be 
divested under the Consent Order.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement. This analysis is not intended to constitute an 
official interpretation of the Consent Agreement, nor is it intended to 
modify its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 04-22697 Filed 10-7-04; 8:45 am]
BILLING CODE 6750-01-P