The proposed $15 billion merger of energy giants El Paso EnergyCorp. and Sonat Inc. got a regulatory go-ahead yesterday from FERC,clearing the way for the transaction to close by early October.

The Commission’s vote came one day after El Paso Energy announcedthat it has agreed to sell East Tennessee Natural Gas, Sea RobinPipeline and its one-third interest in Destin Pipeline to win theFederal Trade Commission’s (FTC) approval of the proposed merger. ElPaso has signed off on the agreement, but not the FTC. It’s expectedto do so “within the next couple of weeks,” said Mel Scott, an El PasoEnergy spokesman. (Daily GPI, Sept. 29)

The soon-to-be divested pipeline systems – East Tennessee, SeaRobin and its interest in Destin – transport a combined 1.4 Bcf/din gas volumes.

The FTC ordered the divestiture of Sea Robin because it foundthat the pipeline, along with the merged company’s interest inLeviathan Gas Pipeline Partners L.P., would have given the mergedcompany monopoly power over gas gathering in the Gulf of Mexico,said El Paso spokeswoman Paula Delaney. She noted Sea Robin andLeviathan combined gather about 70% of the gas in the Gulf.

East Tennessee’s sale was ordered because it presented”potential opportunities for monopolies” in Tennessee, Georgia andthe Carolinas, Delaney said. “Everybody pretty much expected thesedivestitures to occur.” In fact, she reported El Paso has alreadyreceived bids from interested parties for the pipeline assets, butshe refused to identify the bidders. Under the FTC agreement themerged company has until the end of the first quarter of next yearto sell the pipeline assets.

The merger calls for Sonat to be merged into El Paso Energy,leaving El Paso as the surviving corporation.

In approving the merger, FERC examined only the generationholdings of the two merger partners. It concluded that thetransaction didn’t pose any “significant horizontal or verticalcompetitive concerns.” Specifically, the Commission said it didn’tbelieve that El Paso-Sonat, given the “small amounts” of generationowned and controlled by the partners, would use their pipelineassets to “materially” affect delivered gas and electricity prices.

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