Energy Transfer Accused of Boxing Out Louisiana Pipeline Rivals
Energy Transfer Accused of Boxing Out Louisiana Pipeline Rivals
Rachel Adams-Heard and Elizabeth Elkin, Bloomberg News January 22, 2023
(Bloomberg) -- A natural gas pipeline developer is accusing Energy Transfer LP of “anticompetitive” behavior after the company denied three projects from crossing its pipelines in Louisiana, sparking a legal battle affecting more than than $2 billion of energy infrastructure.
A Momentum Midstream affiliate told a Louisiana district court that Energy Transfer is holding up its $1.6 billion project by refusing to let the firm cross the pipelines of its much larger rival. Energy Transfer owns a vital stretch of lines across East Texas and Louisiana and is seeking to expand its Gulf Run system amid booming demand for gas along Louisiana’s coast, where the fuel is chilled to a liquid for export.
“Energy Transfer is blatantly and openly engaged in anti-competitive conduct and unfair trade practices in violation of Louisiana law,” the affiliate, New Generation Gas Gathering LLC, said in a November court filing. “Without entry by competitors, expansion of Gulf Run thus would allow Energy Transfer to control approximately 80% of the relevant market.”
The arguments come in a case in which Energy Transfer sued to block Momentum’s project from crossing its pipelines, saying it would impede upon its rights. Energy Transfer won a similar case against another pipeline company, DT Midstream, earlier this year. That case is now being appealed.
Energy Transfer, co-founded and chaired by billionaire Kelcy Warren, is a behemoth in the pipeline industry. In Texas’s beleaguered energy market, the Dallas-based operator stands out for what for what insiders and customers describe as an especially aggressive negotiating culture, and engaging in activities one expert called “authorized monopoly abuse.”
Read More: A Pipeline Giant Is Helping to Push Texas’s Power Grid to the Brink
Private equity-backed Momentum is one of three developers sparring with Energy Transfer in Louisiana’s courts. Those companies are arguing that the pipeline giant’s claim of holding exclusive right to key parts of the state threatens to upend the gas pipeline industry, raise costs for consumers and potentially harm America’s status as a dominating energy exporter. One case even captured the attention of Louisiana Attorney General Jeff Landry, who’s soon to be the state’s next governor.
Energy Transfer has also sought temporary restraining orders against affiliates of Williams Cos. and DT Midstream for two projects, arguing that its contracts give it exclusive rights to the land and that crossings could jeopardize the safety of its pipelines. Proponents say new projects are essential to ensuring gas from the Haynesville shale formation, primarily in East Texas and northwestern Louisiana, can meet the demand of export terminals and end users along the coast.
In the case of DT Midstream, Energy Transfer won in district court, though the judge said he “does not like the potential consequence” of the ruling. DT Midstream appealed the decision. The company has since disclosed it was able to use an alternate route and is now seeking damages from Energy Transfer for the additional cost, which it calls “significant.”
Energy Transfer, Momentum and DT Midstream representatives declined to comment, citing ongoing litigation. A Williams representative said “pipeline crossings are a standard industry practice necessary for our ability to gather and deliver low-cost, reliable and clean natural gas to premium markets.”
Energy Transfer has said in legal filings that it believes DT Midstream’s appeal is moot. The company also said crossings sought by Williams and Momentum were numerous, contained incomplete information and disregarded landowner contracts that Energy Transfer says gives the operator exclusive right over certain stretches.
Louisiana’s attorney general said that the district judge’s interpretation of “exclusive” in the DT Midstream case is wrong. In a supporting brief filed in the company’s appeal, Landry’s office said the district judge’s decision “will have far-reaching consequences for Louisiana’s energy sector and, indeed, perhaps for the nation’s energy independence.”
Energy Transfer is no stranger to pipeline delays. Its own projects have faced repeated legal and regulatory snafus, most famously in the case of the Dakota Access crude pipeline, which drew on-the-ground protests and years of lawsuits.
Natural gas production from the Haynesville shale basin already faces bottlenecks from a lack of pipeline capacity, the Louisiana Oil & Gas Association said in a supporting brief in DT Midstream’s case. Chesapeake Energy, one of Louisiana’s biggest producers, is a key customer of the Momentum pipeline project and has a 35% ownership option.
--With assistance from Ruth Liao and Mitchell Ferman.
©2023 Bloomberg L.P.
Views: 659
Replies to This Discussion
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Permalink Reply by Steve P on -
I find this to be a disturbing story. I hope the Courts figure out some way to “fix” this. Our family land has 2 gas pipelines and 1 water line on R-O-Ws we granted. I’d prefer not to have any more pipelines, but I REALLY don’t like the idea of a company to which we granted a R-O-W could declare that they could prevent us from granting another one to a different company that would run either above or below the existing pipeline.
Maybe Gov Landry can fashion some legislative fix.
Perhaps all of the players on this Site can begin to push back on any future grants of R-O-W to Energy Partners. Of course, they could take us to Court and get the R-O-W anyhow, but it would really slow them down and cost them money.
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Permalink Reply by Skip Peel - Mineral Consultant on
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All of these pipeline expansions are being built to benefit the LNG export industry. As intrastate pipelines I would think that Louisiana has existing case law that will come into play and that the Attorney General will play a part. The LNG industry is likely to put their weight behind maximizing transportation options. This area of south Louisiana is a spider web of existing pipelines and new construction of any significant distance will often if not always have to cross one or more existing lines. Sounds like an anti competition effort on the part of Energy Transfer to limit producers options on whose pipeline they can send their gas through.
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Permalink Reply by Steve P on
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thanks. Assuming Energy Transfer Partners plan on building more pipelines in NW La or East TX, I still think we land owners should make our views know to Energy Transfer Partners, FERC, and our local State representatives and senators.
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Permalink Reply by Skip Peel - Mineral Consultant on
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By all means.
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Permalink Reply by Bacon on
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Just to relate my experience with our local state representative, Dennis Bamburg, Jr. I emailed Representative Bamburg to relay my concerns about this issue and 10 minutes later, got an email back from his office advising that my email had been brought to his attention. Another 20 minutes and I get a call from Representative Bamburg himself. He was not aware of this particular issue and was interested to find out more. If you dont know your local representatives, heres a link. https://house.louisiana.gov/H_Reps/H_Reps_ByParish
We actually have a section of the ETP Tiger pipeline on our property and in that contract it is specified that they must allow other pipelines to cross them. Its hard to think of everything to include in these agreements but shows that good representation can pay for itself down the road.
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Permalink Reply by Steve P on
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Bacon: that's a good idea, and unbelievable responsiveness from Mr. Bamburg. But I think that this issue may lie more with FERC - Federal Energy Regulatory Commission. So sending the same message to Senator's Kennedy and Cassidy, and Rep Johnson might also help. While I'm "from" Louisiana, I haven't lived there in more than 30 years. Still own some land and minerals.
Skip: Do you think that the Energy Transfer Partners issue is federal, state, or both?
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Permalink Reply by Skip Peel - Mineral Consultant on
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Energy Transfer cannot block rival La. gas line: Court
- Market: Natural gas 10/04/24 argusmedia.com
Energy Transfer cannot block construction of a rival natural gas pipeline that crosses its own, a Louisiana court of appeals today ruled in a 3-0 decision, reversing a preliminary injunction granted a year earlier in midstream company's favor.
The long-awaited decision is an important step forward in the ongoing conflict over Energy Transfer's attempt to block US pipeline companies DT Midstream, Williams and Momentum Midstream from building gas pipelines that cross its own Tiger pipeline in northern Louisiana.
The April 2023 ruling by a state district court in favor of Energy Transfer prompted an outcry from industry groups and now-governor Jeff Landry, who warned the precedent set could threaten production growth out of the Haynesville shale and the coming US LNG export boom.
Louisiana district court judge Nicholas Gasper erred in his interpretation of Energy Transfer's servitude rights when ruling in April 2023 that the company could block DT Midstream, the 2nd Circuit Court of Appeals in Shreveport said in its ruling today.
The case hinges on the validity and meaning of the phrase "exclusive servitude" used in a contract Energy Transfer signed with the now-defunct timber company, Red River Louisiana, from which it purchased the right to construct and maintain the Tiger pipeline in 2010. Energy Transfer says that the "exclusive servitude" clause means no other entity can build a new gas line across the path of the Tiger line without its consent.
The 2nd Circuit Court of Appeals disagreed. The one-time use of the word "exclusive" does not mean Energy Transfer's servitude rights include all depths nor enable it to "subjectively block the crossing of another pipeline," the court said. Moreover, Energy Transfer failed to prove that the safety of the proposed crossing was a concern, but was concerned with how it could extract a commercial benefit from the crossing, the court said.
Energy Transfer in a Louisiana senate committee in March argued the three pipeline companies' projects propose an excessive number of crossings under and over the Tiger line, while an attorney for Momentum contended Energy Transfer is merely interested in controlling market share.
Williams applauded today's court decision, adding it supports its own appeal in the 2nd Circuit of three injunctions obtained by Energy Transfer against Williams' 1.8 Bcf/d (51mn m3/d) Louisiana Energy Gateway pipeline, which proposes to cross the Tiger pipeline. The legal dispute delayed expected completion of the project to the second half of 2025.
Energy Transfer also remains in litigation with Momentum, which in 2022 aimed to have its 1.7 Bcf/d New Generation Gas Gathering pipeline in service by the second half of 2024.
The Louisiana state senate is expected to vote in the coming weeks on a bill seeking to clarify pipeline servitude rights and expedite pipeline crossing disputes, advancing legislation promoted by the three natural gas pipeline companies being blocked by Energy Transfer. The bill is a companion to two bills that passed 100-0 and 99-0, respectively, in the Louisiana House of Representatives on 21 March.
By Julian Hast
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