El Paso Corp.
| Company type | Public |
|---|---|
| Industry | Natural gas |
| Founded | 1928 |
| Founder | Paul Kayser, H. Gordon Frost Sr. |
| Defunct | 2012 |
| Fate | Acquired by Kinder Morgan |
| Headquarters | Houston, Texas , United States |
Area served | North America |
Key people | Douglas L. Foshee (CEO at time of acquisition) |
| Products | Natural gas transportation and marketing, petrochemicals |
Number of employees | 6000 |
| Parent | Burlington Northern Inc. (1983–1992), Kinder Morgan (2012–) |
El Paso Corporation was a leading supplier of natural gas and associated energy commodities, ranking among the top natural gas producers in North America until its 2012 acquisition by Kinder Morgan. Based in Houston, Texas, it controlled the continent's most extensive natural gas pipeline network, stretching from border to border and coast to coast. Its pipeline system encompassed assets such as Colorado Interstate Gas, El Paso Natural Gas, Southern Natural Gas, Tennessee Gas Pipeline, Cheyenne Plains, Mojave, Elba Express, Young Gas Storage, Wyoming Interstate, and the Ruby Pipeline. The company also held 50% ownership interests in Great Lakes Transmission and Florida Gas Transmission (a division of Southern Natural Gas), employing approximately 6,000 personnel. Significant growth occurred through mergers with Sonat in 1999 and the acquisition of Coastal Corporation in 2001.
Key corporate offices were situated in Houston, Birmingham (Alabama), and Colorado Springs. At the time of its sale to Kinder Morgan, the chief executive officer was Douglas L. Foshee.
History
Source: The Pipeliners: The Story of El Paso Natural Gas, by Frank J Mangan, January 1, 1978,
Established in 1928 by Houston lawyer Paul Kayser alongside cattleman H. Gordon Frost Sr., El Paso Natural Gas pioneered the transportation of natural gas via pipeline from Jal, New Mexico to El Paso, Texas. Beginning with limited personnel and resources, the company constructed the world’s inaugural natural gas pipeline system, completed in 1930 despite difficult terrain and primitive construction techniques.
Although the Great Depression began shortly thereafter, consistent demand from El Paso city enabled early profitability and facilitated expansion into southern Arizona and northern Mexico by the mid-1930s. Growth continued into the late 1930s with new pipelines servicing the Permian Basin and extending northward and westward. By this time, annual revenues had reached approximately $5 million.
World War II temporarily slowed expansion efforts; however, postwar economic recovery spurred increased demand throughout the Southwest. The late 1940s witnessed rapid development including a 700-mile pipeline linking Permian Basin operations to California. Between 1945 and 1950, assets surged from $23.5 million to $285 million; sales rose from $9 million to $41 million; net income climbed to $9 million.
During the 1950s, geographic reach expanded into southern Colorado while sales grew across Arizona and New Mexico. By 1955, profits neared $30 million on $180 million in sales; by the early 1960s profits exceeded $40 million on $400 million in sales. A significant acquisition occurred in 1957 with a stake in Pacific Northwest Pipeline Corporation, broadening El Paso’s footprint into Washington state and Canada.
The company diversified into petrochemicals through El Paso Products Company, which manufactured chemical products derived from natural gas but maintained its primary focus on natural gas transportation and marketing.
Founder Kayser stepped down as CEO in the early 1960s after cultivating El Paso into a $500 million enterprise operating a pipeline network spanning 20,000 miles across the western United States.
Growth persisted through the late 1960s and early 1970s despite cyclical industry trends. By then, El Paso managed one of the country’s largest pipeline systems extending from northern Mexico to Washington state with connections reaching Wyoming, Idaho, Oregon, California, Kansas, Oklahoma, and Nevada.
To reduce exposure to market fluctuations, El Paso diversified during this era; by 1974 non-gas operations accounted for roughly one-third of its $1.3 billion revenue. Petrochemicals represented its largest non-gas segment; other ventures included fiber/textiles (nylon and rayon), mining, oil exploration, insurance services, copper wire manufacturing, and real estate development.
A notable initiative was its liquefied natural gas (LNG) project launched in 1969 with Algeria’s Sonatrach to import LNG utilizing a dedicated tanker fleet and storage facilities. LNG shipments commenced in 1978 and became a significant profit contributor.
Nonetheless, many non-gas divisions underperformed or incurred losses throughout the 1970s. A Supreme Court decision in 1974 compelled divestiture of northern operations acquired previously, ending El Paso’s natural gas activities north of New Mexico and Arizona.
Despite these challenges, revenues increased from about $1 billion in the early 1970s to over $2 billion by decade’s end; earnings fluctuated between $50 million and $60 million annually amid volatile energy markets.
The Natural Gas Policy Act of 1978 enabled El Paso to directly compete for natural gas reserves. The company expanded reserves near its Permian Basin pipelines and enhanced production capacity anticipating growing demand throughout the 1980s.
Sales surpassed $2 billion in 1978 and approached $4 billion by 1981 with record net income of $147 million that year. However, an oversupply caused by competitors’ capacity expansions combined with an economic downturn led to price declines; earnings dropped to $53 million in 1982 despite sales reaching $4.3 billion.
In 1983 Burlington Northern Inc., a diversified conglomerate engaged in minerals, timber products, and railroads, acquired El Paso. Burlington regarded El Paso as complementary to its mineral business.
Federal deregulation beginning mid-1980s transformed industry dynamics from merchant sales toward fee-based transportation services. Consequently, El Paso transitioned from owning gas supplies to providing pipeline transport services for fees during the late 1980s and early 1990s.
Under Burlington’s ownership through the early 1990s, El Paso streamlined operations by shedding underperforming assets and focusing on core natural gas infrastructure.
In the early 1990s Burlington shifted focus toward natural gas reserves anticipating price increases; it spun off El Paso Natural Gas Company on June 30, 1992. William A. Wise assumed roles as president and CEO of the independent entity once more.
By then El Paso operated a pipeline network spanning approximately 20,000 miles connecting oil-producing regions in Texas, Oklahoma, New Mexico with major markets including California and Arizona. In its first full year following spin-off (1993), sales exceeded $900 million with net income near $90 million.
Entering the mid-1990s as California’s largest natural gas supplier while adapting to federal regulations redefining it as a transporter rather than merchant supplier posed challenges including an oversupplied California market limiting profitability. Nevertheless investor confidence remained high as stock prices doubled between 1992 and early 1994.
El Paso pursued long-term growth by expanding access to rapidly growing Mexican markets where it held unparalleled pipeline connectivity while also increasing presence within northern California markets.
Acquisition of Coastal, Legal Challenges, and Proxy Battle
In 2001, El Paso expanded its portfolio by acquiring Coastal Corporation, a multifaceted energy firm owned by Oscar Wyatt, which operated oil refineries, gas stations, and was involved in oil, natural gas, and electricity marketing sectors.
On June 26, 2003, El Paso resolved a price gouging lawsuit with a settlement amounting to $1.45 billion.
In October 2011, Kinder Morgan completed the purchase of El Paso Corp. for $21.1 billion.
Tax Strategies
The non-partisan organization Public Campaign criticized El Paso in December 2011 for allocating $2.94 million toward lobbying efforts while reporting zero income tax payments between 2008 and 2010. Despite earning $4.1 billion in profits and increasing executive compensation by 47%, the company received $41 million in tax rebates.
Market Manipulation Allegations
Following a September 27, 2002 ruling by an administrative law judge from the Federal Energy Regulatory Commission, El Paso’s stock value declined after being found to have manipulated gas supplies to inflate California energy prices during 2000-2001. Trader Todd Geiger faced charges for creating false records of 48 gas trades. Subsequently, El Paso withdrew from the energy trading sector.
External links
- Articles with short description
- Natural gas companies of the United States
- Petroleum in Texas
- Defunct companies based in Texas
- Companies based in El Paso, Texas
- Companies based in Houston
- Non-renewable resource companies established in 1928
- Non-renewable resource companies disestablished in 2012
- 1928 establishments in Texas
- 2012 disestablishments in Texas
- Companies formerly listed on the New York Stock Exchange