Phillilps Petroleum To Divest Parts of Gas Pipeline System in Oklahoma To Resolve FTC Competition Concerns over ANR Acquisition

Phillips Petroleum Company has agreed to divest approximately 160 miles of its natural gas pipeline system in Oklahoma as part of a settlement with the Federal Trade Commission over the firm’s acquisition of gas-gathering assets from ANR Pipeline Company. The settlement would resolve FTC charges that the acquisition would substantially reduce competition for natural gas gathering services in areas of five Oklahoma counties -- Harper, Beaver, Woods, Ellis and Woodward. Phillips and ANR are the only, or two of very few, companies that provide gas gathering services in each of these areas and, absent the required divestitures, the result of the acquisition would be higher rates and reduced drilling and production, the FTC alleged.

In the deal at issue, Phillips, through its subsidiary, GPM Gas Corporation, plans to acquire ANR’s gas gathering lines in the Anadarko Basin in northwest Oklahoma. ANR transports natural gas on two mainlines -- one from Louisiana and the Gulf of Mexico into Michigan, and the other from the Anadarko Basin to the upper Midwest, primarily Wisconsin. "Gas gathering" is the transporting of natural gas from the wellhead to a processing plant for transmission to local gas companies, which ultimately distribute it to homes, factories and other end users.

Phillips is based in Bartlesville, Oklahoma, and ANR is a Detroit, Michigan-based firm. This is the second Phillips acquisition involving gas gathering in the Anadarko Basin to be reviewed by the FTC in the last 18 months. In the earlier deal, Phillips signed a consent agreement with the FTC requiring it to modify its acquisition of Enron Corp. so as to exclude 830 miles of pipeline and related assets from the deal (see Aug. 25, 1995 news release for more details).

Under the proposed consent agreement to settle the FTC charges in this case, Phillips would be permitted to acquire the ANR assets, but would be required to divest seven parts of pipeline systems belonging to ANR and Phillips in the Anadarko Basin area, consisting of approximately 160 miles of pipe. Phillips would have to divest the assets to a buyer (or buyers) in a deal that, as approved by the Commission, would permit the buyer(s) to operate the assets in their current business, thus maintaining competition. The consent agreement includes a deadline for the divestiture -- the later of April 30, 1997, or within 30 days after the deal is consummated-- and would allow the Commission, if the deadline were not met, to appoint a trustee who would be authorized to include additional connecting pipeline segments in the divestiture package should that be necessary to meet a buyer’s needs. Phillips also has signed an asset maintenance agreement that requires it to keep the assets to be divested in their current condition and to provide gathering services at existing terms and conditions to customers under contract with ANR, pending divestiture.

In addition, the consent agreement would require Phillips, for 10 years, to notify the Commission before acquiring during any 18-month period more than five miles of gas gathering pipelines in specified areas of the Oklahoma counties. The settlement also contains various reporting provisions that would assist the FTC in monitoring Phillips’ compliance.

The Commission vote to announce the proposed consent agreement for public comment was 5-0.

A summary of the agreement will be published in the Federal Register shortly. Com ments will be accepted for 60 days, after which the Commission will determine whether to make the agreement final and binding. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, NW, Washington, D.C. 20580.

NOTE:  A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, proposed consent agreement, and an analysis of the agreement to assist the public in commenting are available on the FTC’s web site at http://www.ftc.gov and also from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 202-326-2502. Proposed consent agreements also are available by calling 202-326-2637. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 961 0056)