Houston Lawsuit Between Oil & Gas Companies has Potential to Impact Future Mid-Stream Operations


"It stifles competition, increases costs to crude oil shippers, and raises the cost of gasoline."

AUSTIN, Texas (Texas Insider Report) — While the nation's attention is focused on the Biden White House's effort to fight back accusations of having caused record gas prices at the pump, in a State District Court in Harris County, Texas, a lawsuit between two oil and gas companies has the potential to increase energy costs for U.S. consumers as well, claims one of the parties.

Under Texas law, because pipeline companies are often qualified as being "common carriers" – meaning they hold special legal status providing them "eminent domain" powers in order to gain right-of-way access onto private property – they are required to make their pipelines available to other industry participants in order to serve the "public good."

But according to reports, Converge Midstream Partners filed suit last week against both the Magellan Crude Oil Pipeline Company and Magellan Midstream Partners claiming the companies have been involved in ongoing anti-competitive practices.

Arguing that the Magellan companies have failed to uphold their obligation and requirement to "serve the public good" – and as energy prices across the nation escalate and American families experience increasing pain at the pump – Converge says it believes Magellan’s actions are illegal, and worth fighting over in court.

In the lawsuit, Converge claims Magellan has systematically shut out and impeded its operations (as well as that of other competitors,) as it seeks to gain access to the Houston Crude Oil Distribution System, or HDS, in order to move its product and gain access to the next step in the refining marketplace.

Over the years Magellan has acquired a number of existing pipelines in order to build the Houston Crude Oil Distribution System (“HDS”), giving it control of “the last mile” of distribution – where the crude oil reaches end users and export facilities.

As a result, Converge Midstream filed suit against Magellan Midstream seeking hundreds of millions of dollars, citing anti-competitive practices which Converge says could lead to higher energy costs for consumers.

In comments made as the lawsuit was filed, Converge’s CEO Dana Grams said,
 
“Not only is Magellan’s conduct illegal, but it also stifles competition, increases costs to crude oil shippers and markets, and raises the cost of gasoline and other refined products for hardworking people across the country at a time when American businesses and families are already struggling with higher energy prices and surging inflation.”

In 2017 Magellan settled with the Texas Railroad Commission in another Converge complaint, which included an antitrust lawsuit challenging Magellan’s anti-competitive practices of denying Converge connections to the Houston Crude Oil Distribution System.

The settlement allowed Converge to connect with Magellan’s system at only a single junction. The current lawsuit alleges Magellan has violated that settlement agreement, and seeks to stop Magellan from restraining trade, as well as the far-reaching harm it causes.

Depending on the outcome of the case, it could have a significant impact on Magellan’s revenue – and on the way midstream companies like them operate in Texas.

 
Oil & Gas industry production by N/A is licensed under N/A
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