UPR/Duke to Pay $8.3 M in Antitrust Gas Lawsuit
American Central Gas Technologies Co. was awarded $8.3 million
last week after an arbitrator ruled that Union Pacific Resources
and Duke Energy Field Services had monopolized natural gas
processing in Panola County, the largest natural gas producing
county in East Texas.
In the binding arbitration award, arbitrator Harlan Martin ruled
that UPR/Duke monopolized natural gas processing in the area.
Martin, who released his order July 27, wrote that UPR/Duke "has
willfully acquired and maintained monopoly power through a series
of overt acts intended to prevent potential competition and the
entry of others in the Panola County gas processing business." The
ruling is considered significant because UPR and Duke were found to
have violated federal antitrust laws.
Although Duke Energy had objected, U.S. District Judge T. John
Ward of Tyler, TX, ruled last week that Martin's order could be
According to the arbitration order, UPR/Duke processes more than
90% of all gas processed in Panola County. In January 1997,
American Central, headquartered in Tulsa, contracted with UPR/Duke
to process its natural gas until December 2005. On April 1, 1999,
Duke assumed the contract. American Central then filed the lawsuit,
charging that it had been prevented from competing on its own.
The arbitrator awarded actual damages of $7.3 million and
attorney fees of $1.8 million. He subtracted $762,000 from the
award for an overpayment by UPR to American Central for residue
gas. The monetary damages were solely assessed against UPR, which
is a wholly owned subsidiary of Anadarko Petroleum Co.. based in
"This ruling by Judge Martin is the first victory toward ending
the monopolistic practices that have plagued the producers in
Panola County for many years," said Stephen E. Jackson, CEO of
American Central. "American Central will continue to do everything
possible to restore effective competition to give every producer
and royalty owner the services they deserve and the profits they
have rightfully earned."
Thomas Paterson, a partner with Susman Godfrey in Houston and
one of American Central's attorneys, said that his client "had the
guts to take on the biggest natural gas processing player in East
Texas. As a result of their victory, producers and other gas
processing customers in Panola County may soon get some competition
in gas processing, and, hopefully, lower processing costs."
Sam Baxter, a partner with Dallas law firm McKool Smith, worked
with Paterson on the American Central case, and said that even
though monopoly claims are hard to prove, "this is an important
result for our client, but it's also a declaration that UPR and
Duke have monopolized natural gas processing in Panola County."
American Central gathers, treats and processes natural gas as a
service to oil and gas producers. It constructs pipelines to gather
gas from individual wells and then aggregates the gas from
producing wells for compression, dehydration and processing. It
then delivers the gas to various inter- and intrastate long-haul
In July, the U.S. Department of Justice announced that UPR would
pay $2.7 million to settle charges that it had underpaid royalties
due on crude oil drilled from federal and Indian leases. The
settlement covered underpayments back to 1988, and ended
allegations brought by whistle-blowers that UPR, along with other
oil companies, tried to short-change the government for royalty