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El Paso, Coastal Consolidate Pipeline Staff

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 jobs.

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.

Rocco Canonica

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