The Federal Trade Commission (FTC) last Thursday approved the $13 billion merger of Enterprise Products Partners LP and GulfTerra Energy Partners LP on the condition that the parties divest their interests in a Gulf of Mexico natural gas pipeline and a propane storage facility in the Southeast to avert harm to competitive markets.

The consent order called for the partners to sell either Enterprise’s 50% interest in Starfish Pipeline Co., which owns the Stingray/Triton pipeline system in the Western Central Deepwater region of the Gulf, or GulfTerra’s High Island Offshore System (HIOS) and the East Breaks Extension by March 31, 2005. If they fail to meet the deadline, the FTC said it may appoint a divestiture trustee to oversee the sale.

The order also requires Enterprise to divest either its 50% interest in a propane storage facility that it owns with Dynegy Midsteam Services in Hattiesburg, MS, or its 100% interest in a second propane storage facility in Petal, a Hattiesburg suburb, by Dec. 31 of this year. The FTC said Enterprise Products agreed to all of the divestitures.

In ordering the pipeline divestiture, the FTC said the companies currently constitute two of the three primary providers of pipeline transportation for gas producers in the “increasingly significant area” of the West Central Deepwater region of the Gulf. The pipelines owned by Enterprise and GulfTerra account for 60% of the gas pipeline capacity in that portion of the Gulf, and the merger would increase that concentration, according to the FTC.

Both companies also have an ownership interest in three of the four local propane storage facilities in Hattiesburg. Enterprise and GulfTerra, formerly El Paso Energy Partners LP, control 53% of the propane storage capacity, and the merger would only bolster that concentration.

The FTC also ordered Enterprise’s interests in Starfish and Enterprise’s 50% stake in the Hattiesburg propane facility to be operated independently from Enterprise and GulfTerra pending the required divestitures. It has appointed a monitor to oversee the management and operations of Starfish and the propane facility until the completion of the divestitures.

The merger will create the second largest publicly owned energy partnership in the United States. El Paso Corp. will have a 9.9% interest in the general partner of the combined company.

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