CITY OF MOUNDRIDGE, KS. v. Exxon Mobil Corp.

471 F. Supp. 2d 20, 2007 U.S. Dist. LEXIS 2022, 2007 WL 80832
CourtDistrict Court, District of Columbia
DecidedJanuary 9, 2007
DocketCivil Action 04-940 (RWR)
StatusPublished
Cited by28 cases

This text of 471 F. Supp. 2d 20 (CITY OF MOUNDRIDGE, KS. v. Exxon Mobil Corp.) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
CITY OF MOUNDRIDGE, KS. v. Exxon Mobil Corp., 471 F. Supp. 2d 20, 2007 U.S. Dist. LEXIS 2022, 2007 WL 80832 (D.D.C. 2007).

Opinion

MEMORANDUM OPINION AND ORDER

ROBERTS, District Judge.

Eighteen municipalities 1 sued Exxon Mobil Corporation, BP America, Inc., Coral Energy Resources, L.P., ChevronTexaco Corporation, and ConocoPhillips Corporation for violating the antitrust laws by agreeing to artificially inflate the price of natural gas; monopolizing, attempting to monopolize, and conspiring to monopolize; and engaging in price discrimination. The defendants moved to dismiss the amended complaint for lack of standing, for lack of personal jurisdiction, for failure to state a claim as to all claims, and because defendants are protected under the Noerr/Pen-nington doctrine. The plaintiffs have moved to file a first and a second supplemental complaint.

The plaintiffs’ motions will be granted, and because the supplemental complaints reallege the principal claims set forth in the amended complaint, the defendants’ motions to dismiss will be treated as directed at the second supplemental complaint. Plaintiffs have sufficiently pled standing. Because the plaintiffs failed to make out a prima fade case of personal jurisdiction as to defendant ChevronTexa-co, though, ChevronTexaco’s motion to dismiss will be granted. Plaintiffs have stated a claim for conspiracy to fix prices, but have failed to state a claim for actual or attempted monopolization, conspiracy to monopolize and price discrimination. Accordingly, the motions to dismiss by BP America, ConocoPhillips and Exxon Mobil will be denied in part and granted in part. Because defendant Coral is subject to the exclusive jurisdiction of the Federal Energy Regulatory Commission (“FERC”), Coral’s motion to dismiss for failure to state a claim will be granted.

BACKGROUND

Natural gas is sold at three general levels. First, producers who gather and produce the natural gas sell it to transmitters, such as pipeline operators. (2d Supp. Comply 6.) Pipelines or transmission lines then transport the natural gas from the producers’ sites (known as “wellheads”) to retail distribution systems, like municipal or other utilities, or to large direct users. Municipal distribution systems and other utilities then sell the natural gas directly to consumers. (Id.) The plaintiffs, municipalities who own and operate natural gas distribution systems, supply their residents with natural gas. (Id. ¶ 3.) For a number of years, their efforts to provide their residents’ requirements of natural gas at “reasonable prices” were frustrated by the high price of natural gas. (Id. ¶ 5.) Together, the defendants constitute the five major producers of natural gas in the United States, who control over 70% of the natural gas consumed in the United States. (Id. ¶ 7.)

In December of 1999, the National Petroleum Council (“NPC”) 2 released Natu *28 ral Gas: Meeting the Challenges of the Nation’s Growing Natural Gas Demand (“the 1999 Report”). (ConoeoPhillips Mem. of P. & A. in Supp. of Mot. to Dismiss (“Mot. to Dismiss”) at 3.) The 1999 Report stated that the supply of natural gas in the United States had increased since 1992, that natural gas usage in the U.S. would increase between 1999 and 2010, and that this increase in demand could be met by the industry at “an average production weighted U.S. wellhead gas price through 2010 of approximately $2.74 per million British thermal units (‘MMBtu’).” (Pis.’ Mem. in Opp’n to Defs.’ Mot. Dismiss (“Pis.’ Opp’n”) at 5.) The price of natural gas, however, began to exceed the estimate projected in the 1999 Report in early 2000 and has continued to increase since then. (Id. at 6.)

On March 13, 2002, Secretary of Energy Spencer Abraham “requested a new study on natural gas that would provide insights on energy market dynamics, including price volatility ... and natural gas supplies.” (ConoeoPhillips Mot. to Dismiss at 4 (internal quotations omitted).) The NPC formed a new subcommittee and several “Task Groups,” one of which all defendants participated in and one defendant chaired, to undertake the inquiry. (Pis.’ Opp’n at 6.) In September of 2003, the NPC adopted and released one of the “Task Force” reports, Balancing Natural Gas Policy: Fueling the Demands of a Growing Economy (“the 2003 Report”). (Id.; ConoeoPhillips Mot. to Dismiss at 3.) The 2003 Report concluded that there was a shortage of natural gas in the United States and that higher gas prices were required to meet increasing demand. (Pis.’ Opp’n at 7.) According to the 2003 Report, the price of natural gas would continue to rise unless the United States government adopted a series of legislative policies recommended by the NPC. (Id.) The 2003 report projected a steady increase in price over the period of 2003 through 2010. Since the NPC issued the 2003 report, the price of natural gas in the U.S. has not fallen below the level projected in the report. (Id. at 7.) In fact, the average wellhead price for 2004 increased to $5.49 per thousand cubic feet (“Mcf’) and then increased to $6.26 per Mcf in August 2005. 3 (2d Supp.ComplA 20.) The average wellhead price of natural gas in 2006 was $7.05 per Mcf, an increase over the $2.00 per Mcf average price from 1992 to 1999. (Id. ¶ 26.)

After Hurricanes Rita and Katrina made landfall on the Gulf Coast in the fall of 2005, the price of natural gas was expected to average $14.00 per MMBtu between December 2005 and March 2006. (1st Supp.ComplA 26.) In December 2005, New York Mercantile Exchange (“NY-MEX”) futures prices for the 2005-2006 winter reached $15.42 per MMBtu, which was $7.61 per MMBtu higher than the average wellhead price for the 2004-2005 winter months. (2d Supp.ComplY 23.) Similar increases for natural gas futures prices occurred at the Henry Hub futures *29 market 4 at the same time. (Id. ¶ 24.)

Plaintiffs assert that no legitimate justification exists for raising the price of natural gas because there is no shortage in the United States. (2d Supp.Compl^ 27.) Technically recoverable natural gas resources are currently 1,769.6 trillion cubic feet (“Tcf’), representing a 80.9-year supply of natural gas. (Id. ¶ 30.) Working gas, or gas available in the marketplace, in storage was 3.177 Tcf as of September 21, 2006. (Id. ¶ 31.) The amount of natural gas “shut-in,” or temporarily unavailable, as a result of Hurricanes Katrina and Rita between August 26, 2005 and December 9, 2005 was only 0.519 Tcf. (Id. ¶ 32.) When compared to the total consumption of natural gas in the United States in 2005— 21.87 — the plaintiffs allege that no shortage of natural gas exists. (Id. ¶ 28.) Additionally, plaintiffs do not receive their natural gas from the Gulf of Mexico or any other areas that were affected by the 2005 hurricane season. (Id. ¶ 36.)

The defendants, in turn, have reaped substantial profits in the first half of 2006. (Id. ¶ 35.) These profits greatly exceeded the defendants’ reported profits for the first half of

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471 F. Supp. 2d 20, 2007 U.S. Dist. LEXIS 2022, 2007 WL 80832, Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-of-moundridge-ks-v-exxon-mobil-corp-dcd-2007.