UPR settles gas processing monopoly charge

Union Pacific Resources Co. (UPR), Fort Worth, Tex., has been ordered to pay Tulsa-based American Central Gas Cos. (ACGC) $8.3 million in connection with ACGC's claims that UPR and Duke Energy Field Services, a subsidiary of Duke Energy Corp., Charlotte, NC, have monopolized natural gas processing in Panola County, Tex.


Union Pacific Resources Co. (UPR), Fort Worth, Tex., has been ordered to pay Tulsa-based American Central Gas Cos. (ACGC) $8.3 million in connection with ACGC's claims that UPR and Duke Energy Field Services, a subsidiary of Duke Energy Corp., Charlotte, NC, have monopolized natural gas processing in Panola County, Tex.

In a binding arbitration award made public on Aug. 8, arbitrator Harlan Martin ruled that UPR and Duke monopolized gas processing in Panola County, the largest gas producing county in East Texas. Martin awarded ACGC actual damages of $7.3 million and attorney fees of $1.8 million, then subtracted from the award $762,000 that UPR overpaid ACGC for its residue gas. UPR-Duke "has willfully acquired and maintained monopoly power through a series of overt acts intended to prevent potential competition and the entry of others in the Panola County gas processing business,'' Martin wrote in his July 27 order.

Over the objections of Duke Energy, US District Judge T. John Ward of Tyler, Tex., ruled that Martin's order could be made public.

While it isn't against the law for only one processing plant to exist in Panola County, Sam Baxter, a Dallas-based attorney who helped represent ACGC in the case, said UPR took advantage of the situation by charging "anticompetitive" rates to ACGC. Baxter added that Duke Energy Field Services, which bought the plant from UPR and assumed the ACGC contract Apr. 1, 1999, continued the practice of charging higher prices.

UPR had also maintained that ACGC would be unable to take its gas to another processing plant outside or within Panola County because of its contract, which Baxter said the court ruled wasn't true.

Since January 1997, ACGC has contracted with UPR and later Duke to process its gas. That contract is effective through December 2005. UPR and Duke processed or currently process more than 90% of all gas processed in Panola County, according to the arbitration order.

UPR, against which the monetary damages were solely assessed, is a wholly owned subsidiary of Houston-based Anadarko Petroleum Corp. UPR could not be reached for comment Friday.

Duke Energy is disappointed with the arbiter's decision and disagrees that it and UPR had a monopoly in Panola County, said spokeswoman Phyllis Hammond. She added that ACGC had other choices besides UPR for processing its gas.

The company is pleased that overpayments made by Duke and UPR to ACGC would be returned, Hammond said, and that the arbiter ruled against ACGC's claims that Duke and UPR had interfered in ACGC's business relationship with its customers.

More in Companies