El Paso, Coastal Consolidate Pipeline Staff
El Paso Energy and Coastal Corp. announced plans last week to
relocate more than 1,200 employees and retain only satellite
offices at the El Paso Natural Gas headquarters in El Paso, TX, and
the ANR Pipeline headquarters in Detroit, MI, once their merger is
approved by the FTC, which is expected sometime in the fourth
quarter. No final decision on staff reductions has been made, an El
Paso spokeswoman said.
The companies intend to consolidate the operations of their five
pipeline systems into three organizations, collectively led by John
W. Somerhalder II. Under the consolidation plan, the combined
company's nationwide pipeline system will be consolidated into
three regional operations. The western region will consist of El
Paso Natural Gas Company and Colorado Interstate Gas Company and
will be headquartered in Colorado Springs, CO. The eastern region
will consist of ANR Pipeline and Tennessee Gas Pipeline and will be
headquartered in Houston. Southern Natural will make up the
southeastern region headquartered in Birmingham, AL.
John Somerhalder will continue as the executive vice president
of the El Paso Pipeline Group. Patricia A. Shelton, currently
president of El Paso Natural Gas, will lead the consolidated
western region pipelines. Jay Holm, currently responsible for El
Paso's Australian pipeline assets, will return to the United States
to become CEO of the eastern region. Reporting to Holm as
presidents of Tennessee and ANR will be Stephen C. Beasley and
James J. Cleary, respectively. The southeastern region will be led
by James C. Yardley, who will continue as president of Southern.
Shelton, Holm, and James Yardley will report to Somerhalder.
"This consolidation will create the most effective organization
for El Paso's pipeline system," said El Paso CEO William A. Wise.
"Our upcoming merger with Coastal will create an interstate
transmission system that spans the nation, border to border and
coast to coast. This consolidation represents a highly disciplined
approach to managing this system, allowing us to strike a proper
balance between customer focus and operational efficiency. It also
facilitates a company-to-company exchange of expertise across our
system and speeds the merging of separate company cultures."
While the companies will be organizationally merged, the five
pipeline systems will remain separate with separate tariffs and
separate names. Though many back office functions such as
accounting and gas control will be consolidated and relocated to
the new headquarters, field functions and related activities will
remain in their current locations. In addition, some employees will
remain in the El Paso and Detroit locations. The company will ask
affected employees whether they want to be considered for
relocation. Those employees who elect not to relocate will be given
severance packages. Most moves will occur during the first half of
next year, and the majority of the plan is expected to be
implemented by mid-2001.
The companies announced their $16 billion polling-of-interests
transaction in January. The merger is expected to be accretive to
El Paso's earnings per share (EPS) immediately and add more than 5%
to EPS in both 2001 and 2002, Wise said at the time of the merger
announcement. Overall, the two companies expect $200 million in
cost savings. By comparison, the El Paso-Sonat merger created more
than $100 million in savings and more than 600 people lost their
The combined interstate transmission system of the new company
will consist of over 58,000 miles of pipeline, by far the most of
any pipeline company in North America. The system will transport
more than 20 Bcf/d of gas through existing pipeline infrastructure,
but will have sole or part ownership in three other new or proposed
major pipelines, including Alliance, Gulfstream and Independence.
The company also will be the second largest gatherer of natural gas
in the United States and the third largest U.S. producer of gas.