Ruling Finds Union Pacific Resources, Duke Energy Monopolized Natural Gas Processing; American Central Gas Companies Wins $8.3 Million Award.

Business Editors & Legal Writers

DALLAS--(BUSINESS WIRE)--Aug. 9, 2000

Union Pacific Resources Co. has been ordered to pay American Central Gas Companies $8.3 million in connection with American Central's claims that Union Pacific Resources and Duke Energy Field Services have monopolized natural gas processing in Panola County, Texas.

In a binding arbitration award made public on August 8, arbitrator Harlan Martin ruled that UPR/Duke monopolized natural gas processing in Panola County, the largest natural gas producing county in East Texas.

UPR/Duke "has willfully acquired and maintained monopoly power through a series of overt acts intended to prevent potential competition and the entry of others in the Panola County gas processing business," Martin wrote in his July 27 order. Over the objections of Duke Energy, U.S. District Judge T. John Ward of Tyler ruled today that Martin's order could be made public.

Since January 1997, American Central has contracted with UPR/Duke to process its natural gas. On April 1, 1999, Duke assumed that contract, which runs until December 2005. UPR/Duke processes more than 90 percent of all gas processed in Panola County, according to the arbitration order.

"This ruling by Judge Martin is the first victory towards ending the monopolistic practices that have plagued the producers in Panola County for many years," says Stephen E. Jackson, CEO of American Central. "American Central will continue to do everything possible to restore effective competition to give every producer and royalty owner the services they deserve and the profits they have rightfully earned."

That sentiment was echoed by Houston lawyer Thomas Paterson, who along with Dallas lawyer Sam Baxter, represented ACGC in the arbitration: "American Central had the guts to take on the biggest natural gas processing player in East Texas. As a result of their victory, producers and other gas processing customers in Panola County may soon get some competition in gas processing and, hopefully, lower processing costs."

The ruling is also significant because of the finding that UPR and Duke violated federal antitrust laws, Baxter says.

"Monopoly claims are difficult to prove," says Baxter. "This is an important result for our client, but it's also a declaration that UPR and Duke have monopolized natural gas processing in Panola County."

Paterson is a partner with Susman Godfrey in Houston and Baxter is a partner with McKool Smith in Dallas.

The arbitrator awarded actual damages of $7.3 million and attorney fees of $1.8 million. He subtracted from the award $762,000 that UPR overpaid ACGC for its residue gas, for a final award of $8,340,186.52.

American Central is based in Tulsa, Okla., but its principal operations are in Panola County and Western Oklahoma. UPR, against which the monetary damages were solely assessed, is a wholly owned subsidiary of Houston-based Anadarko Petroleum Company (NYSE:APC).