In an antitrust case where two competitors admittedly engaged in concerted action to block a third competitor’s access to a natural gas gathering system, a federal appeals court recently upheld summary judgment for the defendants. Buccaneer Energy (USA) Inc. v. Gunnison Energy Corp. et al. No. 15-1396 (10th Cir. Feb. 3, 2017) rests on application of the ambiguous antitrust law surrounding group boycotts, and the plaintiff’s apparent failure to adequately define relevant antitrust markets or challenge defendants’ conduct as a per se unlawful Section 1 conspiracy. Viewing the defendants’ pipeline as a bona fide joint venture might yield a better analysis of the antitrust issues presented.
Plaintiff Buccaneer Energy (Buccaneer) and defendants Gunnison Energy Corp. (GEC) and SG Interests Ltd. (SGI) are competing natural gas producers in a region of Western Colorado known as the Ragged Mountain Area. Producers in the vicinity had long been transporting natural gas through an independent gathering system that included a processing facility and six-inch diameter pipeline (the “RM Gathering System”) running 20 miles before interconnecting with a larger intrastate pipeline owned and operated by a regulated gas utility.
In 2005, defendants purchased the RM Gathering System and began exercising joint control over its operations. Shortly thereafter, defendant GEC inked a gas purchase agreement with plaintiff’s predecessor Riviera Drilling & Exploration Co. (Riviera), paying Riviera the price at which GEC resold its gas, less a $0.785 per MMBtu fee to transport Riviera’s product through the RM Gathering System. Two years later in October 2007, after GEC doubled the transportation rate to $1.52 per MMBtu, Riviera decided its operations were no longer economical and elected to shut in the wells that had been serviced by the RM Gathering System.
Four months after shutting in its wells, Riviera sold its gas leases to Buccaneer, whose CEO was a former GEC vice president. Buccaneer immediately asked GEC for terms to resume transporting the expected gas production through the RM Gathering System, and GEC responded with a draft contract that included the same rate Buccaneer’s predecessor had rejected four months earlier: $1.52 per MMBtu. Buccaneer countered at the same rate, but tried to soften GEC’s interruptible-service provision while imposing a common carrier obligation on the RM Gathering System’s operations. GEC responded with another draft contract that rejected Buccaneer’s changes and raised the transportation rate to $3.92 per MMBtu.
Buccaneer countered no further, and instead filed an antitrust suit against defendants in Denver federal court. The suit presumably hoped to exploit obvious parallels between plaintiff’s own shut-in wells and the shut-out ski slopes of a seminal antitrust case from just up the road – Aspen Highlands Skiing Corp. v. Aspen Skiing Co., 472 U.S. 585 (1985). In Aspen Skiing, defendant operated three of the four ski slopes in Aspen, while plaintiff operated the fourth. For many seasons, the two jointly offered an “all-Aspen” ski ticket good at all four locations. But defendant ultimately withdrew its three slopes from the arrangement, leaving plaintiff out in the cold and thwarting the smaller rival’s attempts to duplicate a multi-venue ski ticket. The Supreme Court honed in on Aspen Skiing’s decision to terminate a long-standing joint marketing arrangement – a “decision by a monopolist to make an important change in the character of the market” – and concluded that defendant’s conduct could constitute exclusionary acts sufficient to support an antitrust verdict.
It doesn’t take much imagination to put Buccaneer into Aspen Skiing’s boots – plus our nascent gas producer had the added element of collusion. Aspen Skiing involved a unilateral refusal to deal, but GEC and SGI were colluding to deny Buccaneer’s access to a gathering system that had been transporting gas from these same wells only a few months earlier. In its complaint, Buccaneer alleged that the RM Gathering System was “essential to effective competition for production rights and the sale of natural gas from the Ragged Mountain Area,” and by refusing to provide Buccaneer renewed access to the system on reasonable terms, defendants engaged in a conspiracy in restraint of trade in violation of the Sherman Act, Sections 1 & 2.
After discovery, defendants moved for summary judgment on grounds that plaintiff lacked antitrust standing and failed to present sufficient evidence of a conspiracy and harm to competition in a relevant antitrust market. The District of Colorado trial court agreed, granting summary judgment for defendants. The trial court held that while reasonable jurors could find that defendants conspired to deny Buccaneer reasonable access to the RM Gathering System – and “intentionally blocked Buccaneer from entering into competition with them as producers of gas in the Ragged Mountain Area” – defendants were entitled to judgment because plaintiff failed to show how defendants’ conspiracy injured competition in a properly-defined antitrust market. Buccaneer appealed.
The Tenth Circuit affirmed, ruling that Buccaneer’s Section 1 group boycott claim was subject to a rule of reason analysis because plaintiff did not argue for per se treatment in opposing defendants’ motion. The appellate court acknowledged that while concerted...
