The legal problems of Mountain Energy Corp., a Midwest gasmarketer that has been accused of defrauding customers andsuppliers out of millions of dollars, are mounting.

At last count, Mountain Energy was the target of three lawsuits;two requests for temporary restraining orders; a petition for apermanent injunction; and a petition for involuntary bankruptcyproceedings brought by four customers.

The common thread in all the claims of customers and suppliersis they allegedly lost big bucks in their dealings with the KansasCity, MO, marketer — possibly as much as $75 million wheneverything is tallied. They have accused Mountain Energy of failingto pay for delivered gas, of diverting gas from storage that wasowned by other suppliers, and of failing to supply natural gas atthe agreed-upon prices. Mountain Energy officials could not bereached for comment yesterday.

Most recently, four companies — TransCanada Energy MarketingUSA Inc., Tenaska Marketing Ventures, Farmland Industries and DuCoaLP — petitioned the U.S. Bankruptcy Court for the WesternDistrict of Missouri to force Mountain Energy into bankruptcy. Theyclaim they are out a total of $24.6 million because of theirbusiness dealings with Mountain Energy. A hearing has beenscheduled for Nov. 13 at which Bankruptcy Judge Frank Koger willdetermine whether to grant the companies’ petition for involuntarybankruptcy. More companies are expected to participate in the case.

TransCanada Energy joined the bankruptcy petition after MountainEnergy allegedly diverted for its own use gas that it was storingon behalf of TransCanada. Delivery was scheduled to begin inOctober and run through January 2001. “TransCanada was informed byMountain that they could not fulfill their contract obligations inregard to the gas in storage,” said Glenn Herchak, a spokesman forparent TransCanada PipeLines.

Similarly, Tenaska Marketing said its dispute with the marketerarose earlier this month when Mountain Energy indicated it wouldn’tbe able to deliver Tenaska-owned gas that it was supposed to beholding in a storage facility in Oklahoma, according to Tenaskaspokeswoman Jana Martin.

DuCoa, an animal feed and nutrition company with a plant inVerona, MO, “was forced to find alternative sources of natural gasat much higher prices” after Mountain Energy allegedly failed toprovide it with gas under its long-term, fixed-price contract, saidan attorney for the company. It estimated this will cost it anadditional $1.1 million for the remaining year of its contract.

In related action, the Circuit Court of Jackson County, MO, lastweek granted Aquila Energy Marketing Corp. a temporary restrainingorder (TRO) enjoining Manchester Gas Storage Inc. from removing anygas from its storage facility in Grant County, OK. Manchester Gasowns and operates the facility; Mountain Energy is Manchester’sagent for contracting and administering gas storage.

Aquila had sought a TRO against Mountain Energy, but the statecourt rejected it because the marketer by that time had becomeembroiled in bankruptcy proceedings. All legal actions againstMountain Energy in state court were stayed once the petition forinvoluntary bankruptcy was submitted in federal court lastWednesday, said Benjamin Mann, outside counsel for Aquila.

A hearing has been scheduled for Oct. 31 to determine whetherthe TRO against Manchester Gas should be continued. Also pending isa petition seeking a permanent injunction specifically enjoiningMountain Energy and Manchester from transferring Aquila gas fromthe storage facility without the company’s consent.

According to court documents, Mountain Energy had sent Aquilamonthly reports through August confirming that it had 3.43 Bcf ofgas stored in the Manchester facility. “Thereafter, no furtherreports were received and both Mountain Energy and Manchesterrefused to confirm the amount of Aquila’s gas stored in theManchester gas storage facility.”

However, sources at Mountain Energy and Manchester “have advisedAquila recently that Mountain Energy has transferred natural gasfrom the Manchester gas storage facility, including some ofAquila’s 3,432,000 MMBtu, to one or more third parties.”

Likewise, Tenaska Marketing is seeking injunctive relief againstMountain Energy and “other associated parties” as part of legalaction brought in Grant County, OK, where the Manchester storagefacility is located. A hearing on this request is scheduled forOct. 31.

The involuntary bankruptcy petition and other legal action surfacedthis month after Anadarko Energy Services filed a civil lawsuit in theDistrict Court of Harris County, TX, accusing Mountain Energy offailing to pay for $17.8 million worth of gas that was delivered to itin July and August, and of diverting 3 Bcf of Anadarko gas that wassupposed to be in the Oklahoma storage facility (See Daily GPI, Oct. 23)

In the lawsuit, Houston-based Anadarko Energy accused MichaelEichenberg and Rodrick Donovan, co-owners and sole shareholders andofficers of the marketing company, of using Mountain Energy to”perpetrate a fraud against Anadarko.”

In addition to Anadarko Energy and the host of other companies,Columbia Energy Services Corp. of Houston has filed a lawsuit inHarris County, TX, seeking payment of $192,000 for gas it sold toMountain Energy.

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.