Enterprise Products Loses $319 Million Pipeline Verdict

Enterprise Products Loses $319 Million Pipeline Verdict

March 4 (Bloomberg) --Energy Transfer Partners LP (ETP), a Dallas pipeline builder, was awarded $319 million by a Texas jury that found Enterprise Products Partners LP wrongfully dropped it from plans for an oil conduit to compete with the Keystone XL project’s southern leg.

Enbridge Inc. (ENB), which was also a defendant in the month long trial, was found not to have conspired with Enterprise, according to the verdict read in court today by state Judge Emily Tobolowsky in Dallas. Enterprise’s total liability could be as much as $595 million if ETP pursues a disgorgement claim against it.

The proposed ETP pipeline, called the Double-E, would have carried crude oil from a Cushing, Oklahoma, hub to the Gulf of Mexico, vying for business with the southern branch of TransCanada Corp.’s Keystone XL conduit.

Enbridge, based in Calgary, is Canada’s largest transporter of crude oil. Calgary-based TransCanada, that nation’s second biggest pipeline business, is seeking U.S. government approval to build the American part of the 1,179-mile northern leg of the Keystone XL to connect Hardisty, Alberta, with Steele CityNebraska.

TransCanada’s plans were delayed last month by a Nebraska judge’s ruling throwing out the statute relied on to set the pipeline’s path through the state. The state is appealing the decision.

ETP claimed it had an agreement with Houston-based Enterprise Products to build the Double E, plus a commitment from Chesapeake Energy Corp. (CHK) to use the pipeline to ship at least 100,000 barrels of oil a day, at the time that Enterprise announced it was pulling out of the project in August 2011.

Chesapeake Deal

The Chesapeake accord was worth $940 million in revenue, Mike Lynn, an attorney for ETP, told the jury in closing arguments on Feb. 27.

Enterprise, which cited a lack of commercial support for the endeavor, subsequently agreed with Enbridge to acquire the existing Seaway pipeline, which ran from the gulf to Cushing, reverse its flow and then build a twin alongside it.

While ETP claimed it had a partnership-by-conduct under Texas law, the business equivalent of a common law marriage, defense lawyers called that contention a “partnership by ambush,” and the Double-E plan “a failure.”

Enterprise took the Chesapeake commitment with it when it joined up with Enbridge, Lynn told the jury last week.

“These folks on this side of the room stole something,” Lynn said. “They did it intentionally, they did it cold-bloodedly and they knew exactly what they were doing. They did it because they are greedy.”

Canada Shipments

Enterprise abandoned ETP for Enbridge because the latter company had access to oil shipments from Canada, according to Lynn. ETP was entitled to a 25 percent stake in the Enterprise-Enbridge project, he said.

Lynn’s co-counsel, Jeremy Fielding, asked the jury to award their client $594 million in compensatory damages, plus an unspecified amount of punitive damages.

David Beck, a lawyer for Enterprise, told the jury in his closing remarks that there was no binding agreement between those companies.

“Every agreement they signed was to avoid any binding obligation between these parties at all, including any partnership,” Beck said last week. “They didn’t have exclusivity and they deliberately chose not to.”

“The Double E was a failure,” Enbridge attorney Michael Steinberg said during his closing argument. Enbridge was accused of inducing the split between ETP and Enterprise. Steinberg said his client knew only that ETP and Enterprise had no binding contracts and they hadn’t recruited enough clients to make the Double-E project commercially viable.

“It’s wrong to sue in court for what ETP failed to achieve in the market,” the Enbridge attorney said.

The case is Energy Transfer Partners LP v. Enterprise Products Partners LP (EPD), DC-11-12667, District Court, Dallas County, Texas (Dallas).

To contact the reporters on this story: Tom Korosec in state court in Dallas attkorosec@bloomberg.net; Andrew Harris in federal court in Chicago ataharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net