The state of New Mexico wants to get into the natural gas pipeline business and has its eyes set on Enron’s Transwestern Pipeline, but the bidding rules governing the bankruptcy court-directed auction for Enron’s assets apparently won’t allow the state to participate.

According to documents filed in the Enron case in the U.S. Bankruptcy Court for the Southern District of New York last week, the state would like to place a bid for Transwestern but has been unable to do so because of the bulk bidding procedures approved by the court, which require prospective buyers to bid on all of CrossCountry Energy LLC, rather than on the individual assets of the five companies that make up CrossCountry.

Last month, Judge Arthur Gonzalez of the bankruptcy court approved a $2.35 billion sale of CrossCountry to Southern Union and General Electric’s commercial finance energy unit, including assumed debt. Southern Union’s bid surpassed a prior $2.2 billion bid by NuCoastal LLC. The deadline for any additional bids from other suitors is Aug. 23.

New Mexico said it “is…an extremely serious prospective bidder to acquire Transwestern or its assets” because it “believes that ownership of the pipeline would be of particular benefit to its citizenry.”

As a major oil and gas producing state, it has a royalty interest in production. “The critical factor limiting the development of New Mexico’s San Juan Basin has been insufficient capacity of the pipeline,” the state told the court. “Unlike a private company such as Transwestern, or the stalking horse bidder [Southern Union] here, if New Mexico owned the pipeline it would have a unique interest in increasing the capacity of the pipeline to increase the state’s severance and production tax revenues by as much as $50 million or more annually, and by billions over decades to increase other revenue for the state and to create jobs.”

The state also noted that it relies on severance and production tax revenues to fund primary and secondary education, so increased revenue from the pipeline would “help educate New Mexico’s children.”

The state also said it could “better ensure the future of the pipeline” because of its good relationship with the Indian nations that own the land which Transwestern crosses.

“Historically Transwestern has had litigation over the validity of its easements with sovereign Indian nations. Loss of right of way in the future could potentially threaten the shutdown of the pipeline,” the state said, adding that it would be in a “special position to resolve the future right of way issues favorably, thereby eliminating the risk of the pipeline shutting down in the hands of a private owner.”

But perhaps more important to the court, New Mexico said that Enron creditors are being cheated out of higher profits from the sale of these assets because Enron’s “skewed” bidding process has disallowed bids on individual assets, which if sold separately would bring in more than the $2.35 billion being paid by Southern Union.

The state wants to see the bidding rules changed and the deadline for submitting bids extended at least 60 days to allow for due diligence. It also wants the court to force Enron to open up a data room to entities seeking to bid on the individual assets of CrossCountry.

Charles Wollman, a spokesman for New Mexico’s State Investment Council said the state currently is weighing its options and looking into various financing methods.

“[Transwestern] is a significant asset here in New Mexico, and we want to make sure we aren’t derelict in our requirements in assessing any potential opportunities that it might present to us,” he said.

CrossCountry Energy owns a 50% stake in Citrus Corp., owner of Florida Gas Transmission; owns Northern Plains Natural Gas, which has a stake in Northern Border Pipeline Partners; and owns Transwestern Pipeline, a 2,400 mile pipe that transports gas from the San Juan, Anadarko, and Permian Basins to markets in Texas, Arizona, New Mexico and California.

New Mexico also is a creditor in the Enron bankruptcy case with claims totaling $67.8 million.

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