Coastal Corporation

Coastal Corporation
Company type	Public
Industry	Energy, Petroleum
Founded	1955
Founder	Oscar Wyatt
Defunct	2001
Fate	Merged with El Paso Corporation
Headquarters	Houston, Texas, United States
Area served	United States, Caribbean, international
Key people	Oscar Wyatt (founder), David A. Arledge (CEO from 1995)
Products	Petroleum, natural gas, electricity, coal, refining, pipeline transportation
Number of employees	13,300 (1999)

Coastal Corporation was a multifaceted energy and petroleum enterprise based at 9 Greenway Plaza (Coastal Tower) in Houston, Texas. Established in 1955 by entrepreneur Oscar Wyatt under the name Coastal States Gas Producing Company, it eventually merged with El Paso Corporation in 2001. By 1999, Coastal had secured a position on the Fortune 500 list, employing 13,300 individuals and generating $8.2 billion in yearly revenue.

Products

Coastal’s portfolio encompassed the production and distribution of petroleum, natural gas, electricity, and coal, with operations including 962 Coastal-branded service stations across 33 states. The company’s refining capabilities consisted of four facilities: a 150,000 bbl/day refinery in Corpus Christi, Texas, a 180,000 bbl/day plant in Eagle Point, New Jersey, a 250,000 bbl/day refinery located on Aruba, and a smaller 25,000 bbl/day asphalt-focused refinery in Chickasaw, Alabama. Additionally, Coastal operated a fleet comprising oil tankers, tugboats, and barges. In 1991, the company’s sales amounted to $9.549 billion. Its distribution network supplied marine diesel throughout the Caribbean region, natural gas in Colorado, and heating oil to the Northeastern United States.

As a leading producer and distributor of natural gas alongside competitors such as Enron and Williams Companies, Coastal managed an extensive pipeline system stretching approximately 20,000 miles. By the 1990s, this network transported around five billion cubic feet of natural gas daily. Notable pipelines included the Iroquois and Great Lakes lines (both completed in 1991) as well as the Empire State Pipeline (completed in 1992), which were integral to supporting its broad natural gas operations prior to its integration with El Paso Energy.

Founder Oscar Wyatt

Oscar Wyatt, the company’s founder and principal executive, originated from humble beginnings in Beaumont, Texas. After distinguished service as a bomber pilot during World War II, he earned a degree in mechanical engineering from Texas A & M University. Wyatt’s early career involved selling drill bits and employment with Kerr-McGee and Reed Roller Bits before advancing to partnership at Wymore Oil Company. In 1955, he launched Coastal States Gas Producing Company starting with just 68 miles of pipeline and a workforce of 78 employees.

Wyatt’s visionary leadership was instrumental in expanding Coastal’s market reach and influence. He became known for his controversial associations with international figures such as Iraq’s Saddam Hussein and Libya’s Muammar Gaddafi, using these connections to navigate complex geopolitical environments. Notably, he counseled President George H. W. Bush against military action in Iraq and played a role in securing the release of Western hostages from Baghdad. His business tactics earned him a reputation akin to the fictional "JR Ewing," symbolizing his assertive approach and dominant presence within the oil sector.

Following El Paso Energy’s divestiture of Coastal’s petroleum marketing and production divisions to companies including Valero Energy, Sunoco, and ConocoPhillips, Wyatt encountered legal difficulties. In 2007, he admitted guilt for unlawfully transferring payments to Iraq under the Oil-for-Food Programme, breaching United Nations sanctions. His defense pointed to widespread industry involvement in similar practices and claimed selective enforcement by the Bush administration. Despite these legal issues, Wyatt’s career remains significant for its influence on global energy operations and corporate strategic development.

Founding period

Coastal originated in 1955 under the name Coastal States Gas Producing Company.

1970s: Period of swift growth

The 1970s energy crisis, driven by OPEC's production restrictions and price increases, created considerable difficulties for Coastal’s pipeline branch, LoVaca. Fixed-price agreements to deliver natural gas to cities in south Texas became financially unsustainable, causing supply interruptions in San Antonio and Austin. Although regulatory bodies permitted price rises beyond contractual limits, LoVaca faced lawsuits from its customers. To resolve $1.6 billion in litigation, Coastal spun off LoVaca as Valero Energy Corporation in 1979, granting customers a 55% equity stake in Valero. The company’s founder, Wyatt, was not part of this settlement.

Despite these challenges, Coastal maintained profitability and expanded its national footprint. In 1973, it completed a hostile acquisition of Colorado Interstate Gas Company along with three refineries for $182 million, marking its evolution into a nationwide energy entity. That same year, Wyatt rebranded the company as Coastal States Gas Corporation.

Coastal broadened its portfolio by entering coal mining through Southern Utah Fuel Company and ventured into petroleum marketing with Union Petroleum Corporation, later renamed Belcher New England. By 1975, annual revenues had climbed to $1.9 billion. The company’s growth continued with the 1976 acquisition of Pacific Refining’s Hercules facility, increasing refining capacity to 300,000 barrels per day, followed by the purchase of Miami-based Belcher Oil Company in 1977 to enhance fuel oil distribution in the Southeastern United States.

1980s: Corporate rebranding and legal challenges

In 1980, Wyatt changed the company’s name to Coastal Corporation as revenues exceeded $5 billion. That same year, Wyatt along with two other oil industry executives admitted guilt for federal violations related to crude oil pricing, resulting in multi-million dollar penalties and reimbursements. The economic downturn of 1981, combined with excess oil supply and reduced demand due to consumer conservation efforts, led Coastal to record its first loss of $96.4 million. Wyatt responded by implementing cost reductions and workforce downsizing, which restored profitability within half a year.

Amid the mid-1980s deregulation of the U.S. natural gas sector, Coastal leveraged the competitive landscape by initiating hostile takeovers of financially troubled energy companies. Although some attempts were unsuccessful—such as bids for Texas Gas Resources in 1983 and Houston Natural Gas in 1984—the company profited significantly from greenmail payments and stock sales, earning $26.4 million and $42 million respectively. In 1985, Wyatt secured a major acquisition of American Natural Resources for $2.45 billion in cash, considerably enhancing Coastal’s position in the domestic gas market.

In 1987, despite U.S. sanctions targeting Libya, Wyatt orchestrated arrangements for Libyan crude oil to supply Coastal’s Hamburg refinery through foreign subsidiaries exempt from U.S. regulations.

By the late 1980s, improved diplomatic relations between the U.S. and China enabled Coastal to establish a joint venture with China National Chemicals Import and Export Corporation (Sinochem). In 1988, both parties held equal ownership of Coastal’s Pacific Refining Company—marking China’s inaugural investment in U.S. energy assets. This alliance ensured a steady crude supply for Coastal while granting Sinochem access to American markets.

A key element of Coastal’s operational approach was maintaining exceptional employee efficiency at all organizational levels; coal miners achieved output twice above industry norms. However, these rigorous performance expectations resulted in elevated management turnover rates; notably, the refinery division experienced five different managers between 1980 and 1989.

1990s: acquisitions and consistent expansion

In 1991, U.S. sanctions imposed on Libya forced Coastal to cease its operations there; however, founder Wyatt continued to explore opportunities in the Middle East, including substantial crude oil acquisitions from Iraq during the 1980s. Even after restrictions tightened following the Persian Gulf War, Coastal sustained its connections with Iraq, positioning itself for prospective oil access.

The company shut down its Derby refinery in 1992 after incurring losses amounting to $192 million but pursued growth through strategic acquisitions and partnerships. In 1993, Coastal’s subsidiary, ANR Pipeline Company, collaborated in developing the Empire State Pipeline in New York and acquired Soldier Creek Coal Co. along with Sage Point Coal Co. from Sun Co., Inc.

Wyatt resigned as CEO in 1995, with David A. Arledge taking over the role and later ascending to chairman in 1997. Coastal broadened its upstream assets by purchasing offshore fields in Louisiana from Koch Hydrocarbons and acquiring marketing operations in Aruba from an Exxon subsidiary. In 1996, the company established Engage Energy—a joint venture with Westcoast Energy Inc.—to become a leading marketer of natural gas and electricity across North America. To support this expansion, Coastal divested its Utah coal operations for approximately $610 million while retaining coal assets in the eastern United States.

In 1997, Coastal secured an 11% ownership interest in the Alliance Pipeline, which transports Canadian natural gas to Chicago, and announced plans for the Gulfstream Natural Gas System pipeline extending from Alabama to Florida to meet rising energy demand.

With a strategic focus on natural gas amid fluctuating oil markets, Coastal invested substantially in key supply areas such as the Gulf of Mexico, Texas, the Rocky Mountains, and Canada—anticipating consumption growth from 22 to 30 trillion cubic feet by 2010. Exploration budgets increased by $100 million in 1998 and $290 million in 1999, enabling acquisitions of assets in Utah, Colorado, and the Texas Coastal Plain that represented nearly half of its net gas output. By 1999, Coastal operated seven drilling rigs and constructed five platforms in the Gulf of Mexico. On the international front, it pursued exploration ventures in Australia and entered into an agreement with Brazil’s Petrobras.

Coastal also expanded its electric power portfolio by increasing ownership stakes in Michigan cogeneration facilities; planning a power plant project with Xcel Energy in Colorado; acquiring interests in hydroelectric projects located in Panama and Nicaragua; obtaining majority control of a plant in Bangladesh; and managing coal-fired plants in Pakistan and Guatemala. Toward the end of 1999, Coastal partnered with GENER S.A. to acquire a 50% interest in Itabo Generation Company in the Dominican Republic.

Refining activities advanced through a five-year crude supply contract with Mexico’s Petroleos Mexicanos supporting expansion at the Aruba refinery beginning in 1998. Negotiations were initiated with Venezuela’s PDVSA concerning potential ventures at the Corpus Christi refinery, while Eagle Point refinery secured crude supply agreements with Norway’s Statoil.

In 1998, Coastal streamlined operations by closing nearly one hundred retail outlets yet preserved the Coastal brand presence. The company joined forces with Chevron and Mobil Oil Corp. to participate in a $200 million Iraqi crude purchase under the United Nations oil-for-food program. Additionally, it enhanced chemical production capabilities by commissioning a new ammonia plant in Texas and restructured its coal division toward integrated mining, processing, and marketing functions.

2000s: acquisition, divestment, and litigation

Between 1996 and 1998, Coastal experienced a significant decline in operating revenues, dropping from $12.17 billion to $7.37 billion, which exposed the company to potential takeover threats. Although Coastal's Petroleum segment benefited from a production increase exceeding 16% in natural gas and higher oil prices that improved profitability, founder Oscar Wyatt along with the board initiated merger discussions. These negotiations culminated in the acquisition of Coastal by El Paso Energy, a smaller firm with a primary focus on natural gas.

In 2001, El Paso Corporation completed its purchase of Coastal and promptly began divesting large portions of Coastal's Petroleum assets, gradually retiring the Coastal brand and discontinuing its website without delay. The majority of Coastal's retail gasoline outlets were sold off; by 2008, only a handful retained the Coastal name, as many were either rebranded or converted to other brands. Sunoco acquired 245 Coastal service stations for approximately $40 million and took ownership of Coastal’s refinery located in Eagle Point, New Jersey. Valero Energy obtained refineries situated in Texas and Aruba, while Phillips 66 (which later became ConocoPhillips) purchased most of the remaining retail fuel stations.

References

Coastal Corporation. Texas State Historical Association. Accessed February 15, 2015.
Coastal Corporation. Federal Trade Commission.