United States v. El Paso Natural Gas Company

PETITIONER: United States
RESPONDENT: El Paso Natural Gas Company
LOCATION: Taylor Street Pharmacy

DOCKET NO.: 94
DECIDED BY: Warren Court (1962-1965)
LOWER COURT:

CITATION: 376 US 651 (1964)
ARGUED: Feb 25, 1964 / Feb 26, 1964
DECIDED: Apr 06, 1964

Facts of the case

Question

Media for United States v. El Paso Natural Gas Company

Audio Transcription for Oral Argument - February 26, 1964 in United States v. El Paso Natural Gas Company

Audio Transcription for Oral Argument - February 25, 1964 in United States v. El Paso Natural Gas Company

Earl Warren:

Number 94, United States, Appellant, versus El Paso Natural Gas Company, et al.

Mr. Solicitor General.

Archibald Cox:

Mr. Chief Justice, may it please the Court.

This is a major antitrust case in which the Government attacks the merger of two natural gas pipeline companies under Section 7 of the Clayton Act.

The acquiring company is El Paso Natural Gas Company, which at the time of the acquisition was one of the two largest natural gas companies in the country and which was then the only company actually supplying natural gas -- interstate natural gas to California.

The acquired company is Pacific Northwest Pipeline Company, then the only large interstate natural gas company west of the Rocky Mountains and a company which was seeking to enter the California market.

Another aspect of the litigation growing out of this merger was here two years ago when the Court held that set aside in order of the Federal Power Commission, on the ground that it should not have preceded to approve the merger while an antitrust complaint was being prosecuted by the Department of Justice in the District Court.

The question presented here is whether the acquisition itself violates Section 7 of the Clayton Act because it was an acquisition which may tend substantially to lessen competition in the -- in promoting projects for the sale of natural gas to California.

The essential facts, at least the outline of the facts is really quite simple.

We start with the California market for natural gas which was an -- an immense and very rapidly expanding market.

In 1950 for example, six years before the merger, the consumption was 684 million cubic feet daily.

In 1955, it was one billion cubic feet daily.

In 1960, 1.3 billion, in 1965, it's estimated it'll be 1.6 billion and in 1970, two billion cubic feet daily.

It's increasing in other words at an annual rate of approximately 200 million cubic feet a day, much the most dynamic as I understand it in the country.

More than half of California's consumption comes from out-of-state.

It's been 50%, 61% and it can be expected in all probability, but with no certainty to continue to be more than half.

Natural gas is a principal source of energy, it being dependent on interstate pipelines.

California's concern that it should not receive all its gas from one company or that it should be dependent even on one or two suppliers, is a very natural one.

It's one that's been often expressed, the Federal Power Commission and expressed here before this Court.

El Paso, at the time of the merger, was, as I have said, one of the largest natural gas pipeline companies in the country in --at assets of just under a billion dollars, 903 million.

Its pipelines are shown on this separate map that I asked the clerk to distribute only because it was a convenient way of showing where these two companies run.

I think, if anyone started looking in some of the details, he might be misled, and all I'm trying to do is show the main outlines.

El Paso, you'll see, is marked in red.

Its pipelines run from the San Juan Basin, a natural gas basin in Southwest in Colorado and Northwest in New Mexico, the Texas Panhandle and the Permian Basin in West Texas, out to the California border.

At the California border, the gas is picked up either by Pacific Gas and Electric Company which is a distribution company that has virtually a monopoly of the distribution of gas in Northern California or by what are known as the Southern Companies, two affiliated companies which have virtually a monopoly of the distribution of gas in Southern California.

Pacific Northwest was incorporated in 1959 and was certificated in 1954, initially with a view to serving the Northwestern states, Washington, Oregon, Idaho, Utah.

Its pipeline, you will see, is marked in blue.

It runs from a connection with Canadian companies at the border at Sumas, Washington down paralleling the western edge of the Rocky Mountains, down to the San Juan Basin.

Pacific Northwest had four assets or advantages that are worthy of note.

In the first place, it was unique, I think, and that it had access both to the Canadian Gas which was becoming of increasing importance and to the San Juan Basin, another important source of gas.