81 FR 39049 - Energy Transfer Equity, L.P. and The Williams Companies, Inc.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

Federal Register Volume 81, Issue 115 (June 15, 2016)

The consent agreement in this matter settles alleged violations of federal law prohibiting unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the complaint and the terms of the consent orders-- embodied in the consent agreement--that would settle these allegations.

[Federal Register Volume 81, Number 115 (Wednesday, June 15, 2016)]
[Notices]
[Pages 39049-39052]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-14092]


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FEDERAL TRADE COMMISSION

[File No. 151 0172]


Energy Transfer Equity, L.P. and The Williams Companies, Inc.; 
Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis to Aid Public Comment describes both the 
allegations in the complaint and the terms of the consent orders--
embodied in the consent agreement--that would settle these allegations.

DATES: Comments must be received on or before July 11, 2016.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/energytransferequityconsent online or on 
paper, by following the instructions in the Request for Comment part of 
the SUPPLEMENTARY INFORMATION section below. Write ``In the Matter of 
Energy Transfer Equity, L.P.,--Consent Agreement; File No. 151 0172'' 
on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/energytransferequityconsent by following 
the instructions on the web-based form. If you prefer to file your 
comment on paper, write ``In the Matter of Energy Transfer Equity, 
L.P.,--Consent Agreement; File No. 151 0172'' on your comment and on 
the envelope, and mail your comment to the following address: Federal 
Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., 
Suite CC-5610 (Annex D), Washington, DC 20580, or deliver your comment 
to the

[[Page 39050]]

following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Brian J. Telpner (202-326-2782), 
Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC 
20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing consent orders to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement, and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
from the FTC Home Page (for June 9, 2016), on the World Wide Web, at 
http://www.ftc.gov/os/actions.shtm.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before July 11, 2016. 
Write ``In the Matter of Energy Transfer Equity, L.P.,--Consent 
Agreement; File No. 151 0172'' on your comment. Your comment--including 
your name and your state--will be placed on the public record of this 
proceeding, including, to the extent practicable, on the public 
Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a 
matter of discretion, the Commission tries to remove individuals' home 
contact information from comments before placing them on the Commission 
Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which . . . is privileged or confidential,'' as discussed in Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2). In particular, do not include competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/energytransferequityconsent by following the instructions on the 
web-based form. If this Notice appears at http://www.regulations.gov/#!home, you also may file a comment through that Web site.
    If you file your comment on paper, write ``In the Matter of Energy 
Transfer Equity, L.P.,--Consent Agreement; File No. 151 0172'' on your 
comment and on the envelope, and mail your comment to the following 
address: Federal Trade Commission, Office of the Secretary, 600 
Pennsylvania Avenue NW., Suite CC-5610 (Annex D), Washington, DC 20580, 
or deliver your comment to the following address: Federal Trade 
Commission, Office of the Secretary, Constitution Center, 400 7th 
Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. If 
possible, submit your paper comment to the Commission by courier or 
overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before July 11, 2016. You can find more information, 
including routine uses permitted by the Privacy Act, in the 
Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') with Energy Transfer Equity, L.P. (``ETE'') and The 
Williams Company, Inc. (``Williams''). The Consent Agreement is 
designed to remedy the anticompetitive effects that would likely result 
from ETE's proposed acquisition of Williams.
    Under the terms of the proposed Decision and Order (``Order'') 
contained in the Consent Agreement, ETE must divest to a Commission-
approved buyer Williams' ownership interest in Gulfstream Natural Gas 
System L.L.C. (``Gulfstream''), an interstate natural gas pipeline 
serving peninsular (central and southern) Florida. The Order also 
addresses competitive concerns arising from ETE's post-merger control 
over a Williams pipeline segment that serves as the origin for a new 
interstate pipeline that will begin serving Florida in 2017. The Order 
maintains the premerger bargaining position of the new pipeline to 
negotiate future capacity expansions over the Williams pipeline 
segment.
    The Commission has placed the Consent Agreement on the public 
record for 30 days to solicit comments from interested persons. 
Comments received during this period will become part of the public 
record. After 30 days, the Commission will again review the Consent 
Agreement and the comments received, and will decide whether it should 
withdraw from the Consent Agreement, modify it, or make the Order 
final.

II. The Parties and Other Entities

A. ETE

    ETE is a master limited partnership controlling a family of 
companies that own and operate approximately 71,000 miles of natural 
gas, natural gas liquids, refined products, and crude oil pipelines. 
ETE has a 50 percent ownership interest in Florida Gas Transmission LLC 
(``FGT''), one of two interstate pipelines currently transporting 
natural gas to peninsular Florida.

B. Williams

    Williams is an energy infrastructure company focusing primarily on 
natural gas and natural gas liquids infrastructure assets in North 
America.

[[Page 39051]]

Its major holdings include natural gas transportation, gathering, 
treating, and processing assets in multiple natural gas-producing 
areas. Williams has a 50 percent ownership interest in Gulfstream, 
which is the other interstate pipeline currently transporting natural 
gas to peninsular Florida. Williams is also the sole owner of 
Transcontinental Gas Pipe Line Company, LLC (``Transco''), a large 
interstate pipeline system that extends from Texas, Louisiana, and the 
offshore Gulf of Mexico through the Atlantic seaboard and into the New 
York metropolitan area.

C. Sabal Trail

    Sabal Trail Transmission, LLC (``Sabal Trail'') is a new interstate 
pipeline that will begin transporting natural gas to parts of 
peninsular Florida in May 2017. Sabal Trail's sole access to natural 
gas sources will be via a leased segment on the Williams-owned Transco 
system. Sabal Trail and Transco are parties to a capacity lease 
agreement whereby Transco has agreed to expand the leased segment on 
its system in several phases--with each phase to provide a specific 
amount of new pipeline capacity--to support Sabal Trail's operations in 
peninsular Florida.

III. The Proposed Acquisition

    ETE and several affiliates under its control entered into a merger 
agreement with Williams, dated September 28, 2015, pursuant to which 
Williams will be merged with and into Energy Transfer Corp LP, a newly 
created ETE affiliate that will survive the merger (the 
``Acquisition''). The combined entity will become the third largest 
energy company in North America, with a geographically diverse asset 
portfolio used in the transportation, processing, and storage of 
natural gas and natural gas liquids.
    The Commission's Complaint alleges that the Acquisition, if 
consummated, would violate Section 7 of the Clayton Act, as amended, 15 
U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as 
amended, 15 U.S.C. 45, by substantially lessening competition for the 
firm transportation of natural gas by interstate pipeline to locations 
in peninsular Florida.

IV. The Relevant Markets

    Florida's largest natural gas shippers are electric power 
generation utilities, which use natural gas to generate electricity for 
distribution to Florida consumers and businesses. These shippers depend 
on the efficient, reliable, and cost-effective transportation of 
natural gas via interstate pipelines because Florida has virtually no 
in-state natural gas production and no natural gas storage.
    The Commission's Complaint alleges that the relevant product market 
within which to analyze the Acquisition is the firm transportation of 
natural gas by interstate pipeline. Firm pipeline transportation 
guarantees shippers the right to a certain amount of pipeline capacity, 
which generally is not subject to interruption or curtailment by the 
pipeline. Because Florida natural gas shippers, especially electric 
utilities, require a constant and reliable source of natural gas, they 
could not meaningfully substitute non-firm transportation services even 
if the cost of firm pipeline transportation were to increase.
    The Commission's Complaint alleges that the relevant geographic 
market in which to assess the competitive effects of the Acquisition is 
peninsular Florida, which includes pipeline delivery points in central 
and southern Florida.
    Market concentration will significantly increase because of the 
Acquisition. Many natural gas delivery points in peninsular Florida are 
connected to (or reasonably can connect to) both FGT and Gulfstream. 
For shippers located at these delivery points, the Acquisition results 
in a pipeline monopoly. A small number of delivery points connect to 
(or reasonably can connect to) FGT, Gulfstream, and--by May 2017--Sabal 
Trail. For shippers located at these delivery points, the merger 
reduces competitive alternatives from three to two.

V. Effects of the Acquisition

    The Acquisition likely would substantially lessen competition for 
the provision of firm natural gas pipeline transportation to delivery 
points in peninsular Florida. The Acquisition would eliminate 
competition between FGT and Gulfstream that historically has enabled 
Florida shippers to obtain lower transportation rates and better terms 
of service. Absent the Acquisition, competition between FGT and 
Gulfstream likely would continue to allow Florida shippers to negotiate 
better rates and non-price terms.
    In addition, the Acquisition likely will change the incentives of 
Transco's owner to accommodate future capacity expansions of Sabal 
Trail via Transco. FGT can add relatively small amounts of capacity to 
its system more cost-effectively than can Gulfstream. Moreover, FGT's 
pipeline system overlaps with the proposed Sabal Trail system more 
extensively than does Gulfstream's system. If Sabal Trail cannot expand 
its capacity, shippers who cannot obtain new capacity on Sabal Trail 
will more likely turn to FGT for that capacity than to Gulfstream. 
Thus, unlike Williams, which had little or no incentive to deny Sabal 
Trail additional volumes on Transco, ETE will have an incentive to 
forestall expansions on Sabal Trail in order to capture those 
expansions on FGT.

VI. Entry Conditions

    Entry into the relevant markets would not be timely, likely, or 
sufficient to deter or counteract the anticompetitive effects arising 
from the Acquisition. Barriers to entry are significant and include the 
high capital costs of constructing a new interstate pipeline and the 
substantial time needed to design, permit, and construct a new pipeline 
system. Moreover, constructing a new pipeline system would require 
commitments from shippers based on significant new market demand for 
natural gas. Such market demand is unlikely to accumulate for the 
foreseeable future.

VII. The Agreement Containing Consent Order

    The proposed Order resolves the anticompetitive concerns described 
above by requiring ETE to divest Williams' ownership interest in 
Gulfstream and by restoring Sabal Trail's premerger bargaining power to 
negotiate future capacity expansions on Transco.
    To preserve competition between FGT and Gulfstream, the proposed 
Order requires that, within 180 days of closing the Acquisition, ETE 
must divest Williams' 50 percent interest in Gulfstream to a 
Commission-approved buyer. Post-closing divestiture is appropriate 
because this ownership interest is a high-value, low-risk asset likely 
to generate substantial interest among more than one potentially 
acceptable buyer. Under the terms of the Order to Maintain Assets 
contained in the Consent Agreement, ETE must maintain Gulfstream in 
substantially similar condition until the divestiture process is 
complete, thereby preserving Gulfstream as a viable, competitive, and 
marketable asset.
    Any acquirer of Williams' ownership interest in Gulfstream must 
receive prior approval from the Commission. The Commission's goal in 
evaluating possible purchasers of divested assets is to maintain the 
competitive environment that existed prior to the acquisition. A 
proposed acquirer of divested assets must not itself present 
competitive problems.
    The proposed Order also preserves Sabal Trail's future 
competitiveness by

[[Page 39052]]

ensuring Sabal Trail's ability to negotiate additional Transco 
expansions. First, the proposed Order incorporates the capacity lease 
agreement between Transco and Sabal Trail, which reflects terms Transco 
and Sabal Trail reached when an independent and motivated commercial 
partner owned Transco. The proposed Order gives Sabal Trail additional 
flexibility and optionality in obtaining the phased capacity expansions 
already contemplated by the capacity lease agreement. The proposed 
Order terminates twelve years after it issues, in order to cover the 
entirety of ETE's obligations for the expansions currently outlined in 
the capacity lease agreement.
    Second, the Order requires that, within one year of the closing of 
the Acquisition, ETE offer to amend the capacity lease agreement to 
allow Sabal Trail to request expansions for as long as an additional 
eight years after the last expansion currently in the capacity lease 
agreement. These provisions ensure that Sabal Trail has the same future 
expansion opportunities as would have existed if an independent 
Williams continued to own Transco.
    ETE must offer future expansions on the same terms and conditions 
that Transco negotiated as an independent entity. For each requested 
expansion, ETE must inform Sabal Trail of the estimated expansion cost, 
using the same methodology for each that Transco uses in its normal 
course of business. ETE then is obligated to expand Transco as 
requested by Sabal Trail. However, to prevent Sabal Trail from 
requesting cost-prohibitive expansions--expansions that an independent 
Williams would not have agreed to--ETE retains the right to require 
Sabal Trail to pay for the capital costs of the expansion, in which 
case ETE would not charge Sabal Trail a lease fee for that particular 
expanded capacity.
    The proposed Order does not obligate ETE to expand Transco if Sabal 
Trail does not have (or has not secured pre-construction commitments 
from shippers for) sufficient capacity to use the expansion to serve 
Florida. The Acquisition does not change the incentives of Transco's 
owner to deny capacity expansions to serve areas outside of Florida. 
Thus, without this limitation, the proposed Order could give Sabal 
Trail expansion rights it would have been unable to negotiate from an 
independent Transco.
    The Commission does not intend this analysis to constitute an 
official interpretation of the proposed Order or to modify its terms in 
any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2016-14092 Filed 6-14-16; 8:45 am]
 BILLING CODE 6750-01-P