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Anadarko Accuses Marketer of Fraud

Anadarko Accuses Marketer of Fraud

Anadarko Energy Services has accused Mountain Energy Corp., a gas marketer in Kansas City, MO, and the company owners of allegedly defrauding it out of millions of dollars through non-payment of natural gas, as well as theft of gas in storage.

In a civil lawsuit filed in the District Court of Harris County, TX, Anadarko Energy, the gas marketing arm of Anadarko Petroleum, claimed Mountain Energy "failed and refused" to pay for $17.8 million worth of gas that it delivered to the marketer in July and August. Moreover, it said Mountain Energy has informed it that it has no intention of paying for the gas.

Anadarko Energy also alleges the marketer robbed it of 3 Bcf of gas that was supposed to be in an Oklahoma storage facility and ready for delivery Oct. 1. Anadarko said it had purchased and pre-paid for the gas from Mountain Energy. "Apparently, Mountain Energy has removed Anadarko's gas from the storage facilities for its own use without notice to or permission from Anadarko. Mountain Energy has, therefore, converted Anadarko's natural gas," it said in the lawsuit.

As a result, Anadarko "has been forced to purchase substitute supplies of natural gas from other sources and has incurred significant damages as well."

The lawsuit accuses Michael Eichenberg and Rodrick Donovan, co-owners and sole shareholders and officers of the marketing company, of using Mountain Energy to "perpetrate a fraud against Anadarko," which is based in Houston. Each is "jointly and severally liable for the conduct of Mountain Energy and the damages suffered by Anadarko."

Last February, Eichenberg provided a personal guaranty to ensure payment by Mountain Energy for its gas purchases from Anadarko, and the company also gave Anadarko a security interest in its assets to guarantee payment, according to the suit, which seeks recovery of unspecified actual and punitive damages. Additionally, it seeks to establish a constructive trust for payments Mountain Energy may receive as the result of the resale of gas that it either purchased from (but did not pay for) or sold to Anadarko Energy. Efforts to reach both Eichenberg and Donovan on Friday were unsuccessful.

Reports that there were problems between Mountain Energy and Anadarko Energy surfaced earlier this month. At the time, Mountain Energy said it had to ask about 10% of its customers to convert their fixed-priced supply contracts to index-based arrangements for the remainder of their contract terms due to what it said was a "major dispute" with Anadarko Energy over the "hedging of our accounts."

Both Mountain Energy and Anadarko Energy refused to discuss the details of the dispute then. Donovan went as far as to downplay the impact it would have on the company's customers, who are primarily located in Missouri and Kansas. In fact, he noted Mountain Energy had given its nearly 700 industrial and commercial supply customers the option to change gas suppliers, but only a handful (six to eight accounts) had elected to do so.

At the time, Donovan indicated the "hedging" dispute would "require some time to bring to closure," and that Mountain Energy was in the process of trying to switch from Anadarko Energy to a new gas supplier.

Anadarko Energy is not the only company that has brought legal action against Mountain Energy. In a lawsuit also filed in Harris County, TX, Columbia Energy Services Corp. of Houston said it's still awaiting payment of $192,000 for gas it sold to the marketer.

Susan Parker

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