Final Word for El Paso

THE chief asset of Pacific Northwest Pipeline Corp. is a steel artery about two feet in diameter that winds through six Western states bringing natural gas to eleven million consumers. El Paso Natural Gas Co., which has the nation's largest reserves of that fuel, acquired Pacific Northwest and its strategic pipeline in 1957, and El Paso executives have been fighting in court ever since to hang on to their purchase. Last week they reached the end of the line: the Supreme Court ordered El Paso to get rid of Pacific Northwest.

The ruling ends a saga of byzantine complexity. In the past 16 years, the case has come before the Supreme Court no fewer than eight times. Some 39 companies, Government agencies and private citizens have joined the case over the years. At one point, a bill was introduced in Congress to exempt the El Paso-Pacific Northwest merger from the antitrust laws, but it died in committee. El Paso paid close to $16 million to lawyers and public relations men during its losing fight.

At first the merger appeared routine. Pacific Northwest, formed by a group of engineers in 1954, did little better than break even during its first three years. With the approval of Pacific Northwest directors, El Paso bought the firm for stock worth $151.8 million. El Paso executives explained that they wanted the pipeline primarily to link their company's own pipes with new gas finds in Canada. But Justice Department lawyers thought that El Paso was really out to protect its position as the only major out-of-state supplier of natural gas to California. Pacific Northwest had not then put a pipeline into the state, but the firm had agreed to supply a California utility with natural gas at a price 25% cheaper than El Paso was charging customers in the area. By acquiring Pacific Northwest, the Government contended, El Paso was removing an important potential competitor.

A federal judge in Utah ruled in favor of El Paso in 1962, but the Supreme Court overturned the decision in 1964. The same lower-court judge then approved a divestiture agreement that kept effective control of Pacific Northwest in the hands of El Paso's management. In 1967 the Supreme Court removed the Utah judge from the case and ordered that Pacific Northwest be sold to an independent third party. A federal judge in Colorado then approved another divestiture proposal in 1968, but the Supreme Court later threw it out. Last year the Colorado federal court approved a new plan designating Colorado Interstate Corp. as buyer of the pipeline. But before El Paso could appeal, Colorado Interstate was taken over by Coastal States Gas Transmission Co.; the Colorado court redrew its proposal and substituted the Apco Group, a combine of four relatively small companies (Apco Oil Corp., Alaska Interstate Co., Gulf Interstate Co. and Tipperary Land & Exploration Corp.). Last week the Supreme Court confirmed that choice.

The order will create a sizable new company, to be called Northwest Pipeline, with assets of $300 million and revenues of $190 million a year. It will rank fourth in North American natural gas reserves after El Paso, Tennessee Gas Pipeline Co. and Northern Natural Gas Co. The Apco Group will buy 20% of Pacific Northwest for a price still to be negotiated; El Paso shareholders will have options on the remaining 80% of the stock.

Impressive as the figures seem, El Paso executives say that the new company will not have enough money to finance the massive exploration necessary to help relieve the present energy crisis. They contend further that without the economies that a combined El Paso-Pacific Northwest operation provided, Western consumers will have to pay higher prices for gas. Opponents counter that the new company will be able to afford extensive exploration, and that competition is likely to hold prices down rather than push them up.

The consequences for El Paso itself will not be severe. El Paso Chairman Howard Boyd says that losing Pacific Northwest will not jeopardize any previously announced plans to import Algerian natural gas into the U.S. and expand gas exploration around the world. El Paso remains the General Motors of the pipeline industry, with financial and natural gas reserves that exceed those of any competitor. El Paso shareholders will not have their total holdings diminished by the divestiture, and El Paso will not have to surrender any of the more than $2 billion that Pacific Northwest has contributed since the ill-fated pipeline marriage began.

This file is automatically generated by a robot program, so reader's discretion is required.