by Joe Shea
Port Manatee News
August 9, 2011
STATE TO PROBE POTENTIAL FOR NATURAL GAS PIPELINE MONOPOLY IN $9.4 BILLION DEAL
BRADENTON, Fla., Aug. 9, 2011, 3:13 p.m. ET (Updated 8:21 p.m. ET)-- Florida's chief financial officer Jeff Atwater, and perhaps the state's Attorney General, will launch a probe of a possible monopoly of the state's two existing natural gas pipelines that could occur if a pending buyout by the Williams Companies - which already owns one of the pipelines - is allowed to proceed, a source familiar with the inquiry told the Port Manatee News.
Problematically, however, the construction of a little-known, new undersea Norwegian pipeline project near Port Manatee, soon to become the closest deepwater port to the Panama Canal in the continental United States, could undermine assertions that Williams would have a monopoly.
Williams Pipeline initially bid $39 a share to buy Southern Union, whose Gulfstream Natural Gas subsidiary owns the other of the two pipelines that serve Florida.
A Williams Compasnies competitor, Energy Transfer Equity of Dallas, is bidding a choice of $44.25 in cash or ETE equities (worth $37.57 at Aug. 9's market close), to Southern Union shareholders in an offer that is valued at about $9.4 billion. That would allow Energy Equity Transfer to acquire the Gulfstream pipeline from Alabama to Florida and ensure competition in the state.
The issue has been raised repeatedly with Fla. Gov. Rick Scott by Hernando County State Senator Mike Fasano (R-11, New Port Richey) in letters and press releases, his office said. Atwater's office responded to a July 22 letter from Fasano to Atwater in a phone call to Giordano on August 2, Giordano said. That person today reconfirmed the plan to look into the issue, Giordano said.
Meanwhile, an Energy Equity Transfer spokesman also weighed in on the issue in a telephone conversation with the Port Manatee News.
"There are antitrust concerns related to the Williams Companies bid," said Mark Palmer, a spokesman for the EET merger at The Brunswick Group public relations firm. "They would own both pipelines that provide the peninsula of Florida with natural gas," he said.
The merger has not been completed, but Palmer said there is a signed merger agreement with Energy Equity Transfer and Southern Union, the seller, and the deal is expected to close in the first quarter of 2012, Palmer said.
"We passed the Hart-Scott-Rodino [antitrust] review with no objections," Palmer added, and the review period has now expired without any action by Williams Cos. He indicated that the review process would have included the attorney general's office in any discussion of the potential for a monopoly on supplying natural gas to Florida.
A request for comment left on the phone of a Williams Companies spokesman after regular business hours was not returned Tuesday, leaving it unclear if Williams still wants to pursue the merger.
Atwater spokesperson Alexis Lambert said she that while she had no firsthand knowledge of the Atwater aide's response to Fasano, she thought the state attorney general's office would normally take the lead in looking into such a matter.
"I understand they are keeping close tabs on this issue," Lambert said.
Gov. Scott has not responded to Sen. Fasano's July 22 letter. A merger in which state lands are involved would likely have to be approved by the Governor's cabinet.
"The CFO's office has responded to the senator's letter with a promise to look into the legal aspects of a potential monopoly," Fasano's chief legislative assistant, Greg Giordano told the Port Manatee News Tuesday afternoon.
Fears of a monopoly may be diminished by the proposed construction of the offshore Port Dolphin project, where liquid natural gas would be delivered by special ships called SRVs from Louisiana refiners, get regasified at sea and then piped 28.8 miles to shore for distribution.
That project, from Port Dolphin Energy LLC, a Delaware company ultimately owned by the huge Norway-based shipper Höegh LNG AS, would initially serve the South Florida region from a Gulfstream Natural Gas transmission hub close to Port Manatee. Hoegh LNG representatives said that pipeline could be extended across the state to serve other markets, company officials told Port Authority of Manatee County officials recently.
However, the hopes for that project may be dashed by Manatee County officials, Giordano said.
"It is my understanding that the Port Dolphin project is running into zoning problems and may not be able to actually deliver as promised," Giordano said.. "If this is a correct understanding of the situation, then Florida would be left with the two transmission lines that are the subject of the senator's letter," if the Williams bid succeeds, he told the Port Manatee News.
"Senator Fasano believes that competition in the open markets is ultimately in the best interest of Floridians, especially if it is a market that has few competitors. The pipeline is a good example of this situation," Giordano said. "About 55% of Florida's electricity is generated by natural gas. Currently, Florida's use exceeds its production, and thus the need to import the gas from out of state," he said.
However, he added, "Regarding the Port Dolphin issue, if you believe the zoning will be taken care of, then I guess that is not a concern. However, I have been led to believe that the facility is over-promised and under-delivered."
Giordano said there is precedent that gives standing to the claim that the gas pipelines should not be owned by the same company. In 2001, the Federal Trade Commission and Florida's Attorney General successfully kept Gulfstream Natural Gas System from being purchased or otherwise owned by Williams Pipeline, which already owns the Florida Gas Transmission Pipeline. Williams Pipeline is trying to buy the Gulfstream pipeline, too.
"In essence, Senator Fasano objects to the monopoly ownership of the two pipelines. That would run counter to the principles of a healthy, competitive energy market for Florida. That is why he has asked that the state look into the ramifications of the purchase before it is allowed to move forward," Giordano said.
Port Manatee News editor Joe Shea is based in the Manatee County, Fla., community of Bradenton, where he covers the port and Manatee County government. Write him at firstname.lastname@example.org.