82 FR 12102 - Enbridge Inc. and Spectra Energy Corp; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

Federal Register Volume 82, Issue 38 (February 28, 2017)

Page Range		12102-12104
FR Document		2017-03889

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 82 Issue 38 (Tuesday, February 28, 2017)

[Federal Register Volume 82, Number 38 (Tuesday, February 28, 2017)]
[Notices]
[Pages 12102-12104]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-03889]

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FEDERAL TRADE COMMISSION

[File No. 161 0215]

Enbridge Inc. and Spectra Energy Corp; 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 March 20, 2017.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/enbridgespectraconsent 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
Enbridge Inc. and Spectra Energy Corp File No. 161-0215'' on your
comment and file your comment online at https://ftcpublic.commentworks.com/ftc/enbridgespectraconsent by following the
instructions on the web-based form. If you prefer to file your comment
on paper, write ``In the Matter of Enbridge Inc. and Spectra Energy
Corp File No. 161-0215'' 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.

FOR FURTHER INFORMATION CONTACT: Eric Cochran (202-326-3454), 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 order 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 February 16, 2017), 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 March 20, 2017.
Write ``In the Matter of Enbridge Inc. and Spectra Energy Corp File No.
161-0215'' 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/enbridgespectraconsent 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
Enbridge Inc. and Spectra Energy Corp File No. 161-0215'' 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. 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 March 20, 2017. 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 Order 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 Enbridge Inc. (``Enbridge'') and Spectra Energy Corp
(``Spectra''). The Consent Agreement is designed to remedy the
anticompetitive effects that likely would result from Enbridge's
proposed merger with Spectra (the ``Merger'').

[[Page 12103]]

The Merger, if consummated, will result in Respondent Enbridge
having ownership interests in the two closest and likely lowest-cost
pipelines that provide or can provide natural gas pipeline
transportation from many Deepwater Outer Continental Shelf oil and gas
leasing and exploration blocks (``blocks'') in certain natural gas
producing areas in the Gulf of Mexico. Enbridge, through a wholly owned
subsidiary, owns and operates the Walker Ridge Pipeline. Spectra has an
indirect, minority ownership interest in the Discovery Pipeline. The
Complaint alleges that, resulting from the Merger, Enbridge will have
access to competitively sensitive information of its competitor, the
Discovery Pipeline, and gain voting rights over the Discovery
Pipeline's significant capital expenditures, including expansions
needed to connect to new wells. Without adequate safeguards, Enbridge
could misuse that information and its voting rights, leading to
anticompetitive conduct that would make the Discovery Pipeline a less
effective competitor or would facilitate coordination in the industry.
To remedy these concerns, under the terms of the Proposed Decision and
Order (``Order'') contained in the Consent Agreement, Enbridge is
required to erect firewalls to limit its access to non-public
information relating to the Discovery Pipeline. In addition, all board
members appointed by Enbridge or Spectra to the boards of directors
overseeing the Discovery Pipeline must recuse themselves from any vote
pertaining to the Discovery Pipeline, with limited exceptions.
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

A. Enbridge
Enbridge is an energy delivery company that operates primarily in
the United States and Canada. Its primary business is in pipeline
transportation of crude oil; however, it also has significant natural
gas gathering, processing, transportation, and storage assets. Enbridge
owns several interconnected natural gas pipelines that export natural
gas from the Gulf of Mexico to processing plants in Louisiana.
B. Spectra
Spectra is one of the largest North American pipeline and midstream
companies. Spectra predominately focuses on natural gas, providing
natural gas gathering, storage, and transportation in the southeastern
and northeastern United States and in southeastern Canada. Through a
joint venture with Phillips 66 (``Phillips''), Spectra owns an indirect
minority interest in the Discovery Pipeline, a natural gas pipeline
that transports natural gas from Deepwater areas in the Gulf of Mexico
to processing plants in Louisiana.

III. The Proposed Merger

Respondent Enbridge and affiliated companies under its control
entered into a merger agreement with Spectra, dated September 5, 2016,
pursuant to which Sand Merger Sub, Inc., a newly created direct wholly
owned subsidiary of Enbridge, will merge with and into Spectra, with
Spectra surviving the Merger. The combined entity will be the largest
energy infrastructure company in North America, with a geographically
diverse asset portfolio used in the gathering, processing, storage, and
transportation of natural gas and the pipeline transportation of crude
oil.
The Commission's Complaint alleges that the Merger, 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
transportation of natural gas from wells in certain natural gas
producing areas in the Gulf of Mexico, to processing plants or
interconnects with other natural gas pipelines.

IV. The Relevant Markets

The Commission's Complaint alleges that the relevant product market
within which to analyze the Merger is natural gas pipeline
transportation. Natural gas producers contract with natural gas
pipelines to connect to and transport natural gas from wells to
processing plants or interconnects with other natural gas pipelines.
Even if pipeline transportation rates increased slightly, shippers
would continue to use pipelines as no economic or practical alternative
to natural gas pipeline transportation exists.
The Commission's Complaint alleges that the relevant geographic
markets within which to analyze the Merger are no broader than the
Green Canyon, Walker Ridge, and Keathley Canyon offshore natural gas
producing areas in the Gulf of Mexico off the coast of Louisiana
(collectively and individually referred to as ``Gulf Producing
Areas''). Other transportation methods for natural gas in the Gulf
Producing Area are significantly more costly, less reliable, and
potentially more hazardous than the parties' pipelines.

V. Market Structure

The Commission's Complaint alleges that Enbridge and Spectra own
interests in the two pipelines closest to wells drilled in certain
blocks in the Gulf Producing Areas, including blocks that lie between
the pipelines. Enbridge, through a wholly owned subsidiary, owns and
operates the Walker Ridge Pipeline. Spectra holds an indirect minority
ownership interest in the Discovery Pipeline, via its 50-50 joint
venture with Phillips (DCP Midstream, LLC (``DCP''), which in turn has
an effective 36.1 percent limited partner interest in DCP Midstream
Partners, LP (``DPM'')). DPM owns a 40 percent interest in the
Discovery Pipeline; Williams Partners L.P. owns the majority interest
(60 percent) in the Discovery Pipeline and is its operator.
The Commission's Complaint alleges that the length of pipeline
needed to connect an existing pipeline to a well is a major factor in
determining the overall cost for the pipeline to connect to the well.
Thus, more distant pipelines likely face higher costs to connect to
wells, resulting in higher natural gas pipeline transportation prices
for natural gas producers. Where the Walker Ridge Pipeline and the
Discovery Pipeline are a producer's nearest options--as they are for
many blocks in the Gulf Producing Areas--they each likely could expand
to connect to the producer's well for the lowest costs. As such, the
Walker Ridge Pipeline and the Discovery Pipeline are the two pipelines
most likely to compete successfully for projects in certain blocks in
the Gulf Producing Areas.

VI. Effects of the Merger

While Spectra does not outright own the Discovery Pipeline or hold
a majority interest in it (or operate it), through its indirect,
minority ownership interest in DPM, Spectra has access to competitively
sensitive information of the Discovery Pipeline and significant voting
rights. This relationship creates two primary competitive concerns
after the Merger. First, Enbridge-appointed directors will vote on the
Discovery Pipeline's significant capital expenditures, which likely
will include future expansions needed to connect to wells. Enbridge
will have the incentive

[[Page 12104]]

and ability to reduce the competitiveness of Discovery Pipeline bids
for projects for which the parties' pipeline are the closest and
lowest-cost options.
Second, Enbridge will have access to the Discovery Pipeline's
competitively sensitive information. When its Walker Ridge Pipeline
competes with the Discovery Pipeline, Enbridge may use this
competitively sensitive information to raise transportation costs for
natural gas producers. The exchange of information also may increase
the likelihood of tacit or explicit coordination between the Walker
Ridge Pipeline and the Discovery Pipeline.

VII. Entry Conditions

Entry into the relevant markets would not be timely, likely, or
sufficient to deter or counteract the anticompetitive effects arising
from the Merger. Barriers to entry are significant. Building pipeline
underwater is an expensive and lengthy process, often taking several
years from the initial proposal to the end of construction.

VIII. The Agreement Containing Consent Order

The proposed Order resolves the anticompetitive concerns described
above by requiring that (1) Enbridge erect firewalls to limit its
access to non-public information relating to the Discovery Pipeline,
and (2) all representatives appointed by Enbridge or Spectra to the DCP
or DPM boards of directors recuse themselves from any vote pertaining
to the Discovery Pipeline, with two limited exceptions. First,
Enbridge's representatives may vote on initiatives to expand the
Discovery Pipeline beyond natural gas pipeline services in the Gulf of
Mexico. This provision ensures that Enbridge does not have to
participate in business ventures unrelated to the Discovery Pipeline's
current business. Second, Enbridge's representatives may participate in
votes to change DPM's ownership interest in the Discovery Pipeline. The
use of firewalls and recusal provisions is appropriate because the
competitive concerns arise from a discrete overlap that constitutes a
relatively small portion of DCP's and DPM's overall physical footprints
and business portfolios.
The proposed Order allows the Commission to appoint a monitor. The
Commission has appointed Robert Ogle, who currently is associated with
Claro Group LLC. Mr. Ogle will help ensure the effectiveness of the
firewall provisions and ongoing compliance with the Order. The
Commission routinely appoints monitors for orders involving firewall
provisions. Mr. Ogle will serve for a 5-year term, but the Commission
may extend or modify the term as appropriate. The Order will have a
term of 20 years.
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. 2017-03889 Filed 2-27-17; 8:45 am]
BILLING CODE 6750-01-P

Document Created: 2017-02-27 23:53:31
Document Modified: 2017-02-27 23:53:31

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
Action		Proposed consent agreement.
Dates		Comments must be received on or before March 20, 2017.
Contact		Eric Cochran (202-326-3454), Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC 20580.
FR Citation		82 FR 12102