A U.S. district judge has upheld an arbitration award in a natural gas monopoly lawsuit against Duke Energy Fuels LLP and Duke Energy Field Services Inc. (DEFS), ruling that Duke illegally maintained its monopoly power in the gas processing market in Panola County, TX. The ruling rejected Duke’s attempt to vacate an earlier award to provide a gas processing contract on competitive terms to American Central Eastern Texas Gas Co. LLP and American Central Gas Cos. Inc.

Judge T. John Ward of the U.S. District Court for the Eastern District of Texas, in a ruling May 29, upheld an earlier arbitration award ordered by Harlan Martin, an arbitrator and now retired judge. Martin ruled two years ago that Union Pacific Resources Co. (UPR) and DEFS had monopolized gas processing in Panola County, and ordered UPR to pay American Central $8.3 million (see NGI, Aug. 14, 2000). There were no monetary damages against DEFS. The ruling was considered significant because UPR and Duke were found to have violated federal antitrust laws.

American Central initiated the arbitration proceeding in order to prevent Duke from continuing to abuse its monopoly power in Panola County, which is the site of the Carthage Field in East Texas and one of the state’s largest gas-producing counties, with current production in excess of 650 MMcf/d.

According to Martin’s original arbitration order, UPR/Duke was processing more than 90% of all gas processed in Panola County. In January 1997, Tulsa-based American Central contracted with UPR/Duke to process its natural gas until December 2005. On April 1, 1999, Duke assumed the contract. American Central then filed the lawsuit, charging that it had been prevented from competing on its own.

According to the evidence produced by The Furth firm, which represented American Central, Duke abused its monopoly power by refusing to negotiate with American Central in good faith to provide American Central with a competitive gas processing contract. American Central further demonstrated that Duke had refused to provide American Central with timely and accurate information concerning its Carthage Hub, which, according to The Furth firm, was “another anti-competitive tactic used by Duke to illegally maintain and abuse its monopoly power.”

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