NGC Corporation; Proposed Consent Agreement With Analysis To Aid Public Comment

Federal RegisterSep 16, 1996

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FEDERAL TRADE COMMISSION

[File No. 961-0046]

NGC Corporation; Proposed Consent Agreement With Analysis To Aid

Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair or deceptive acts or practices and unfair methods of

competition, this consent agreement, accepted subject to final

Commission approval, would require, among other things, the Houston,

Texas-based corporation to resign as operator of two Mont Belvieu,

Texas natural gas fractionation plants in which it has an interest. The

agreement resolves charges that NGC's acquisition of certain natural

gas transportation and processing assets from Chevron Corporation would

have left only two companies operating four fractionating plants and

would have extended NGC's control to three of those plants. The

Commission alleged that the acquisition would substantially reduce

competition in violation of federal antitrust laws and, ultimately,

could have led to higher fees for fractionating of natural gas liquids.

DATES: Comments must be received on or before November 15, 1996.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:

George Cary, Federal Trade Commission, H-374, 6th & Pennsylvania Ave,

NW, Washington, DC 20580. (202) 326-3741.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the

Commission's Rules of Practice (16 CFR 2.34), notice is hereby given

that the following consent agreement containing a consent order to

cease and desist, having been filed with and accepted, subject to final

approval, by the Commission, has been placed on the public record for a

period of sixty (60) days. Public comment is invited. Such comments or

views will be considered by the Commission and will be available for

inspection and copying at its principal office in accordance with

Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR

4.9(b)(6)(ii)).

Agreement Containing Consent Order

The Federal Trade Commission (``Commission'') having initiated an

investigation of the proposed combination involving NGC Corporation

(``NGC'') and certain assets of Chevron Corporation, and it now

appearing that NGC, hereinafter sometimes referred to as ``proposed

respondent,'' is willing to enter into an agreement containing an Order

to divest certain assets, and to cease and desist from certain acts:

It is hereby agreed by and between proposed respondent, by its duly

authorized officers and attorneys, and counsel for the Commission that:

1. Proposed respondent NGC is a corporation organized, existing and

doing business under and by virtue of the laws of the state of

Delaware, with its office and principal place of business located at

13430 Northwest Freeway, Suite 1200, Houston, Texas 77040.

2. Proposed respondent admits all the jurisdictional facts set

forth in the draft of complaint.

3. Proposed respondent waives:

a. any further procedural steps;

b. the requirement that the Commission's decision contain a

statement of findings of fact and conclusions of law;

c. all rights to seek judicial review or otherwise to challenge or

contest the validity of the Order entered pursuant to this agreement;

and

d. any claim under the Equal Access to Justice Act.

4. This agreement shall not become part of the public record of the

proceeding unless and until it is accepted by the Commission. If this

agreement is accepted by the Commission, it, together with the draft of

complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

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this agreement and so notify the proposed respondent, in which event it

will take such action as it may consider appropriate, or issue and

serve its complaint (in such form as the circumstances require) and

decision, in disposition of the proceeding.

1. This agreement is for settlement purposes only and does not

constitute an admission by proposed respondent that the law has been

violated as alleged in the draft of complaint, or that the facts as

alleged in the draft complaint, other than jurisdictional facts, are

true.

2.This agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of Sec. 2.34 of the Commission's

Rules, the Commission may, without further notice to the proposed

respondent, (1) issue its complaint corresponding in form and substance

with the draft of complaint and its decision containing the following

Order to divest and to cease and desist in disposition of the

proceeding and (2) make information public with respect thereto. When

so entered, the Ordered to divest and to cease and desist shall have

the same force and effect and may be altered, modified, or set aside in

the same manner and within the same time provided by statute for other

orders. The Order shall become final upon service. Delivery by the

United States Postal Service of the complaint and decision containing

the agreed-to Order to proposed respondent's address as stated in this

agreement shall constitute service. Proposed respondent waives any

right it may have to any other manner of service. The complaint may be

used in construing the terms of the Order, and no agreement,

understanding, representation, or interpretation not contained in the

Order or the agreement may be used to vary or contradict the terms of

the Order.

3. Proposed respondent has read the proposed complaint and Order

contemplated hereby. Proposed respondent understands that, once the

Order has been issued, it will be required to file one or more

compliance reports showing that it has fully compiled with the Order.

Proposed respondent further understands that it may be liable for civil

penalties in the amount provided by law for each violation of the Order

after it becomes final.

Order

It is ordered That, as used in this Order, the following

definitions shall apply:

A. ``Combination'' means the transactions contemplated by the

Combination Agreement and Plan of Merger, dated as of May 22, 1996,

among NGC Corporation, Chevron U.S.A. Inc., and Midstream Combination

Corp.

B. ``Commercial Operator'' means the person or entity with the

legal authority to enter into contracts on behalf of a Fractionation

Facility to provide third parties with the service of fractionation for

a fee ans to set the prices offered to third parties for such service.

C. ``Facility Operator'' means any person or entity with the legal

authority to engage in any activity involved in the routine management,

supervision or operation of a Fractionation Facility, including, but

not limited to: the receipt, measurement, handling and storage of raw

natural gas liquids delivered to the Fractionation Facility; the

maintenance, repair and operation of any equipment, machinery or other

assets used in the course of the operation of the Fractionation

Facility; the handling, storage and movement of Specification Products

produced at the Fractionation Facility prior to receipt by a third

party; the purchase and use of material and supplies in connection with

the operation, maintenance and repair of the Fractionation Facility;

the provision of accounting, billing and scheduling functions necessary

for the processing of transactions with Fractionation customers; the

provision of engineering services necessary for operation of the

Fractionation Facility; preparation and submission of any necessary

reports to governmental authorities; the procurement of any necessary

licenses and permits on behalf of the Fractionation Facility; the

purchase of services necessary for the Fractionation Facility's

operation; and the supervision of the implementation of any decision to

expand or modify, repair or maintain the Fractionation Facility.

D. ``Fractionation'' means the process of separating raw natural

gas liquids into specification products.

E. ``Fractionation Facility'' means a facility that separates raw

natural gas liquids into specification products.

F. ``GCF means Gulf Coast Fractionators, a Texas general

partnership.

G. ``GCF'' Expansion Project'' means any current or future project

involving an expenditure for equipment or other capital assets

reasonably necessary to increase the capacity of the GCF Fractionation

Facility beyond its effective capacity level at the time the

expenditure is undertaken.

H. ``GCF Fractionation Facility'' means the Fractionation Facility

owned by GCF located at 1.5 miles west of Highway 146 on FM 1942, Mont

Belvieu, Chambers County, Texas.

I. ``GCF Partnership Agreement'' means the Amended and Restated

Partnership Agreement between Trident NGL, Inc. and Liquid Energy

Corporation and Conoco Inc., effective December 1, 1992.

J. ``MB I'' means Mont Belvieu I, a Fractionation Facility,

originally constructed by Cities Service Company in 1970, located at

9900 FM 1942, Mont Belvieu, Chambers County, Texas.

K. ``MB I Ownership Agreement'' means the Agreement for the

Construction, Ownership and Operation of the Mont Belvieu I

Fractionation Facility between Trident NGL, Inc. and Union Pacific

Fuels, Inc., dated November 17, 1993, and any subsequent amendments

thereof.

L. ``NGC'' means NGC Corporation, its directors, officers,

employees, agents and representatives, predecessors, successors and

assigns; its subsidiaries, divisions, and groups and affiliates

controlled by NGC, and the respective directors, officers, employees,

agents, representatives, successors and assigns of each.

M. ``Property to be Divested'' means NGC's interest in (1) MB I;

and (2) all assets, title, properties, interest, rights and privileges,

of whatever nature, tangible and intangible, and other property of

whatever description and location used in the business of MB I

including, without limitation:

1. All buildings, machinery, fixtures, equipment, vehicles,

pipelines, storage facilities, furniture, tools, supplies, spare parts

and other tangible personal property located in Mont Belvieu, Texas;

2. All rights, title and interest in and to real property located

in Mont Belvieu, Texas, together with appurtenances, licenses, and

permits;

3. All books, records and files;

4. All rights under warranties and guarantees for equipment,

express or implied;

5. All technical information and drawings for equipment;

6. All vendor lists, catalogs, sales promotion literature, and

advertising materials;

7. All inventory of finished goods, work in progress, raw materials

and supplies;

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8. All the option of the Acquirer all rights, title and interests

in and to the contracts and leases entered into in the ordinary course

of business with suppliers, measurement equipment operators, storage

facility operators, transmission pipeline operators, Fractionation

customers and personal property lessors and licensors, pertaining to

the operation of MB I, provided that where third party consent is

required to complete the transfer described in this subparagraph, NGC

shall use best efforts to obtain such third party's consent.

N. ``Specification products'' mean ethane, propane, ethane-propane

mix, iso-butane, normal-butane and natural gasoline.

It is further ordered That:

A. Within six (6) months after the signing of the Agreement

Containing Consent Order, NGC shall divest, absolutely and in good

faith, the Property to be Divested. The Property to be Divested shall

be divested only to an acquirer or acquirers that receive the prior

approval of the Commission, and only in a manner that receives the

prior approval of the Commission. The purpose of the divestiture

required by this Order is to ensure the continued operation of MB I in

the Fractionation business in the same manner as conducted by MB I at

the time of the proposed divestiture and to remedy the lessening of

competition alleged in the Commission's complaint.

B. Upon the signing of the Agreement Containing Consent Order, NGC

shall immediately give the requisite six (6) months notice under the MB

I Ownership Agreement of its intent to cease serving as the Commercial

and Facility Operator at MB I. Within thirty (30) days after the

signing of the Agreement Containing Consent Order, NGC shall cease to

serve as the Commercial Operator of MB I, provided the other party to

the MB I Ownership Agreement agrees to be installed as the Commercial

Operator of MB I by that date. In the event that the other party to the

MB I Ownership Agreement has not elected to become the Commercial

Operator within said thirty (30) day period, NGC may continue to serve

as the Commercial Operator of MB I, but shall do so: (i) Under the

provisions of Paragraph 3 of the Hold Separate Agreement (``Hold

Separate''), attached hereto and made a part hereof as Appendix I; and

(ii) only until divestiture contemplated in Paragraph II.A. of this

Order is achieved, provided such divestiture occurs within the six-

month period described therein. If such divestiture does not occur

within said six-month period, NGC shall cease to serve as the

Commercial Operator of MB I by the date on which that six-month period

expires and the provisions of Paragraph III.C. of this Order shall

apply. NGC may continue to serve as Facility Operator of MB I until the

divestiture contemplated in Paragraph II.A. of this Order is achieved,

provided such divestiture occurs within the six-month period described

therein. If such divestiture does not occur within that six-month

period, NGC shall cease to serve as the Facility Operator of MB I by

the date on which that six-month period expires and the provisions of

Paragraph III.C. of this Order shall apply.

C. NGC shall do nothing to prevent, impede or interfere with the

person or entity that succeeds NGC as either the Commercial Operator or

the Facility Operator of MB I in undertaking reasonable efforts to

offer employment to any NGC employee who assists in the performance of

any activities that NGC engages in as the Commercial Operator or

Facility Operator at MB I, respectively.

D. Pending divestiture of the Property to be Divested, NGC shall

take no action impairing the validity and marketability of the Property

to be Divested and shall not cause or permit the destruction, removal,

or impairment of any assets or business of the Property to be Divested,

except in the ordinary course of business and except for ordinary wear

and tear.

E. NGC shall comply with the Agreement to Hold Separate attached to

this Order and made a part thereof (``Hold Separate''). Said Hold

Separate shall continue in effect until NGC has divested the Property

to be Divested or until such other time as the Hold Separate provides.

III

It is further ordered That:

A. If NGC has not divested, absolutely and in good faith and with

the Commission's prior approval, the Property to be Divested as

required by Paragraph II of this Order within six (6) months after the

signing of the Agreement Containing Consent Order, the Commission may

appoint a trustee to divest the Property to be Divested. In the event

the Commission or the Attorney General brings an action pursuant to

Section 5(l) of the Federal Trade Commission Act, or any other statute

enforced by the Commission, NGC shall consent to the appointment of a

trustee in such action. Neither the appointment of a trustee nor a

decision not to appoint a trustee under this Paragraph shall preclude

the Commission or the Attorney General from seeking civil penalties or

any other relief available to it, including a court-appointed trustee,

pursuant to Section 5(l) of the Federal Trade Commission Act, or any

other statute enforced by the Commission, for any failure by NGC to

comply with this Order.

B. If a trustee is appointed by the Commission or a court pursuant

to Paragraph III.A. of this Order, NGC shall consent to the following

terms and conditions regarding the trustee's powers, authorities,

duties and responsibilities:

1. The Commission shall select the trustee, subject to the consent

of NGC, which consent shall not be unreasonably withheld. The trustee

shall be a person with experience and expertise in acquisitions and

divestitures. If NGC has not opposed, in writing, the selection of any

proposed trustee within ten (10) days after notice by the staff of the

Commission to NGC of the identity of any proposed trustee, NGC shall be

deemed to have consented to the selection of the proposed trustee.

2. Subject to the prior approval of the Commission, the trustee

shall have the exclusive power and authority to divest the Property to

be Divested.

3. Within ten (10) days after appointment of the trustee, NGC shall

execute a trust agreement that, subject to the prior approval of the

Commission and, in the case of a court-appointed trustee, of the court,

transfers to the trustee all rights and powers necessary to permit the

trustee to effect the divestiture required by this Order.

4. The trustee shall have twelve (12) months from the date the

Commission approves the trust agreement described in Paragraph III.B.3

to accomplish the divestiture, which shall be subject to the prior

approval of the Commission. If, however, at the end of the twelve-month

period the trustee has submitted a plan of divestiture or believes that

divestiture can be accomplished within a reasonable time, the

divestiture period may be extended by the Commission, or in the case of

a court-appointed trustee, by the court; provided, however, that the

Commission may extend the divestiture period only two (2) times.

5. NGC shall provide the trustee with full and complete access to

the personnel, books, records and facilities relating to the Property

to be Divested, or any other relevant information, as the trustee may

request. NGC shall develop such financial or other information as such

trustee may request and shall cooperate with the trustee. NGC shall

take no action to interfere with or impede the trustee's accomplishment

of the divestiture. Any delays in

[[Page 48700]]

divestiture caused by NGC shall extend the time for divestiture under

this Paragraph in an amount equal to the delay, as determined by the

Commission or for a court-appointed trustee, the court.

6. The trustee shall make reasonable efforts to negotiate the most

favorable price and terms available in each contract that is submitted

to the Commission, subject to NGC's absolute and unconditional

obligation to divest at no minimum price. The divestiture shall be made

in the manner and to the acquires or acquires as set out in Paragraph

II of this Order; provided, however, if the trustee receives bona fide

offers from more than one acquiring entity, and if the Commission

determines to approve more than one such acquiring entity, the trustee

shall divest to the acquiring entity or entities selected by NGC from

among those approved by the Commission.

7. The trustee shall serve, without bond or other security, at the

cost and expense of NGC, on such reasonable and customary terms and

conditions as the Commission or the court may set. The trustee shall

have authority to employ, at the cost and expense of NGC, such

consultants, accountant, attorneys, investment bankers, business

brokers, appraisers, and other representatives and assistants as are

reasonably necessary to carry out the trustee's duties and

responsibilities. The trustee shall account for all monies derived from

the divestiture and all expenses incurred. After approval by the

Commission and, in the case of a court-appointed trustee, by the court,

of the account of the trustee, including fees for his or her services,

all remaining monies shall be paid at the direction of NGC and the

trustee's power shall be terminated. The trustee's compensation shall

be based at least in a significant part on a commission arrangement

contingent on the trustee's divesting the Property to be Divested.

8. NGC shall indemnify the trustee and hold the trustee harmless

against any losses, claims, damages, liabilities, or expenses arising

out of, or in connection with, the performance of the trustee's duties,

including all reasonable fees of counsel and other expenses incurred in

connection with the preparation for, or defense of any claim, whether

or not resulting in any liability, except to the extent that such

liabilities, losses, damages, claims, or expenses result from

misfeasance, gross negligence, willful or wanton acts, or bad faith by

the trustee.

9. If the trustee ceases to act or fails to act diligently, a

substitute trustee shall be appointed in the same manner as provided in

Paragraph III.A. of this Order.

10. The Commission or, in the case of a court-appointed trustee,

the court, may on its own initiative or at the request of the trustee

issue such additional orders or directions as may be necessary or

appropriate to accomplish the divestine required by this Order.

11. The trustee shall have no obligation or authority to operate or

maintain the Property to be Divested.

12. The trustee shall report in writing to NGC and to the

Commission every sixty (60) days concerning the trustee's efforts to

accomplish divestiture.

C. If NGC has not divested, absolutely and in good faith and with

the Commission's prior approval, the Property to be Divested as

required by Paragraph II of this Order within six (6) months after the

signing of the Agreement Containing Consent Order, NGC shall, by such

date: (i) Cease to serve as the Commercial Operator of MB I (assuming

NGC is then serving as Commercial Operator under the provisions of

Paragraph 3 of the Hold Separate); (ii) cease to serve as the Facility

Operator of MB I; and (iii) take all necessary steps under the MB I

Ownership Agreement to install the other party to said Ownership

Agreement as the Commercial Operator and the Facility Operator of MB I.

It is further ordered That:

A. Upon the signing of the Agreement Containing Consent Order, NGC

shall immediately give the requisite six (6) month notice under the GCF

Partnership Agreement of its intent to cease serving as the Commercial

and Facility Operator at GCF. Within thirty (30) days after the signing

of the Agreement Containing Consent Order, NGC shall cease to serve as

the Commercial Operator of GCF, provided a replacement agrees to be

installed as the Commercial Operator of GCF by that date. Within one

hundred and twenty (120) days after the signing of the Agreement

Containing Consent Order, NGC shall cease to serve as the Facility

Operator of GCF, provided a replacement agrees to be installed as the

Facility Operator of GCF by that date. In the event that a replacement

has not elected to assume the activities of the Commercial Operator of

GCF within the thirty (30) day period provided or that a replacement

has not elected to assume the activities of the Facility Operator of

GCF within the one hundred and twenty (120) day period provided, then

the provisions of Paragraph 4 of the Hold Separate shall apply, but

only until six (6) months after the signing of the Agreement Containing

Consent Order. NGC shall, by the end of said six (6) month period: (i)

Cease to serve as the Commercial Operator of GCF (assuming NGC is then

serving as Commercial Operator under the provisions of Paragraph 4 of

the Hold Separate); (ii) cease to serve as the Facility Operator of

GCF; and (iii) take all necessary steps under the GCF Partnership

Agreement to install one of the other parties to said Partnership

Agreement as the Commercial Operator and the Facility Operator of GCF.

B. NGC shall do nothing to prevent, impede or interfere with the

person or entity that succeeds NGC as either the Commercial Operator or

the Facility Operator of GCF in undertaking reasonable efforts to offer

employment to any NGC employees who assist in the performance of any

activities that NGC engages in as the Commercial Operator or as the

Facility Operator at GCF, respectively.

C. In its capacity as a GCF partner, GCF shall sponsor and support

an amendment to the GCF Partnership Agreement to allow any two partners

(together holding at least a 50% ownership interest in GCF) to commit

GCF to undertake a GCF Expansion Project, while providing that a

partner may choose to limit its participation in the costs and benefits

of such Project. Until such time as the GCF Partnership Agreement is so

amended, NGC shall vote in favor of any GCF Expansion Project proposed

by another GCF partner, and furthermore NGC shall take no action to

prevent, block, delay or impede in any way any GCF Expansion Project,

but rather shall provide all reasonable cooperation necessary to

facilitate any such Project sought by other GCF partner or partners;

provided however, that this provision does not obligate NGC to accept

any financial burden or legal responsibility with respect to such GCF

Expansion Project to the extent that such burden or responsibility is

out of proportion to NGC's ownership interest in GCF.

D. Except as permitted in the Hold Separate, NGC shall not

participate in any matter or negotiations pertaining to fractionation

fees or other terms pursuant to which customers other than NGC obtain

fractionation services at GCF.

It is further ordered That, for a period of ten (10) years from the

date this Order becomes final, NGC shall not, without providing advance

written notification to the Commission, directly or indirectly, through

subsidiaries,

[[Page 48701]]

partnerships, or otherwise: (i) Acquire any stock, share capital,

equity, or other interest in any concern, corporate or non-corporate,

engaged at the time of such acquisition, or within the two years

preceding such acquisition, in the Fractionation business within ten

(10) miles of Mont Belvieu, Texas, or (ii) become the Commercial

Operator or Facility Operator of any Fractionation Facility within ten

(10) miles of Mont Belvieu, Texas, other than the Fractionation

Facility currently operated by Chevron U.S.A. Inc. Said notification

shall be given on the Notification and Report Form set forth in the

Appendix to Part 803 of Title 16 of the Code of Federal Regulations as

amended (hereinafter referred to as ``the Notification''), and shall be

prepared and transmitted in accordance with the requirements of that

part, except that: no filing fee will be required for any such

notification, notification shall be filed with the Office of the

Secretary of the Commission, notification need not be made to the

United States Department of Justice, and notification is required only

of NGC and not of any other party to the transaction. NGC shall provide

the Notification to the Commission at least thirty (30) days prior to

acquiring any such interest (hereinafter referred to as the ``first

waiting period''). If, within the first waiting period, representatives

of the Commission make a written request for additional information,

NGC shall not consummate the acquisition until twenty (20) days after

substantially complying with such request for additional information.

Early termination of the waiting periods in this paragraph may be

requested and, where appropriate, granted by letter from the

Commission's Bureau of Competition.

Provided, however, that prior notification shall not be required by

this Paragraph V of this Order for:

A. The construction or development by NGC of a new Fractionation

Facility or the installation of NGC as the Commercial Operator or

Facility Operator of any such facility; or

B. The expansion or enhancement of an existing Fractionation

Facility owned by NGC in whole or in part; or

C. Any transaction for which notification is required to be made,

and has been made, pursuant to Section 7A of the Clayton Act, 15 U.S.C.

18a.

It is further ordered That:

A. Within sixty (60) days after the date the Agreement Containing

Consent Order is signed and every sixty (60) days thereafter until NGC

has fully complied with the provisions of Paragraphs II or III of this

Order, NGC shall submit to the Commission a verified written report

setting forth in detail the manner and form in which it intends to

comply, is complying, and has complied with Paragraphs II and III of

this Order. NGC shall include in its compliance reports, among other

things that are required from time to time, a full description of the

efforts being made to comply with Paragraphs II and III of the Order,

including a description of all substantive contacts or negotiations for

the divestiture and the identity of all parties contacted. NGC shall

include in its compliance reports, subject to any legally recognized

privilege, copies of all written communications to and from such

parties, all internal memoranda, and all reports and recommendations

concerning divestiture.

B. One (1) year from the date this Order becomes final, annually

for the next nine (9) years on the anniversary of the date this Order

becomes final, and at other times as the Commission may require, NGC

shall file a verified written report with the Commission setting forth

in detail the manner and form in which it has complied and is complying

with Paragraphs IV and V of this Order. Such reports shall include, but

not be limited to, a listing by name and location of all Fractionation

Facilities in the Mont Belvieu, Texas, in which NGC has any ownership

interest, including but not limited to ownership interest obtained due

to default, foreclosure proceedings or purchases in foreclosure, made

by NGC during the twelve (12) months preceding the date of the report.

VII

It is further ordered That, for a period of ten (10) years from the

date this Order becomes final, NGC shall notify the Commission at least

thirty (30) days prior to any proposed change in its organization that

may affect compliance obligations under this Order, such as

dissolution, assignment or sale resulting in the emergence of a

successor, or the creation or dissolution of subsidiaries, or any other

change that may affect compliance obligations under this Order.

VIII

It is further ordered That, for the purpose of determining or

securing compliance with this Order, subject to any legally recognized

privilege, upon written request with reasonable notice to NGC made to

its principal officer, NGC shall permit any duly authorized

representative or representatives of the Commission:

A. Access, during the office hours of NGC and in the presence of

counsel, to inspect and copy all books, ledgers, accounts,

correspondence, memoranda and other records and documents in the

possession or under the control of NGC relating to any matters

contained in this Order; and

B. Upon five (5) days' notice to NGC and without restraint or

interference therefrom, to interview officers or employees of NGC, who

may have counsel present, regarding such matters.

It is further ordered That this Order shall terminate twenty (20)

years from the date this Order becomes final.

Appendix I

Agreement To Hold Separate

This Agreement to Hold Separate (``Hold Separate'') is by and

between NGC Corporation (``NGC''), a corporation organized and existing

under the laws of the state of Delaware, with its office and principal

place of business located at 13430 Northwest Freeway, Suite 1200,

Houston, Texas 77040, and the Federal Trade Commission (the

``Commission''), an independent agency of the United States Government,

established under the Federal Trade Commission Act of 1914, as amended,

15 U.S.C. 41, et seq. (collectively, the ``Parties'').

Premises

Whereas, on or about May 22, 1996, NGC entered into a Combination

Agreement and Plan of Merger with Chevron U.S.A. Inc., a subsidiary of

Chevron Corporation (``Chevron''), and Midstream Combination Corp.,

which contemplates certain transactions (hereinafter, such transactions

collectively referred to as ``the Proposed Combination''); and

Whereas, NGC and Chevron both operate fractionation facilities in

Mont Belvieu, Texas; and

Whereas, the Commission is now investigating the Proposed

Combination to determine whether it would violate any of the statutes

enforced by the Commission; and

Whereas, if the Commission accepts the Agreement Containing Consent

Order (``Consent Agreement''), the Commission must place the Consent

Agreement on the public record for public comment for a period of at

least sixty (60) days and may subsequently withdraw such acceptance

pursuant to the provisions of Section 2.34 of the Commission's Rules;

and

Whereas, the Commission is concerned that if an understanding is

not reached preserving competition

[[Page 48702]]

during the period prior to the final issuance of the Consent Agreement

by the Commission (after the 60-day public notice period), there may be

interim competitive harm, and relief resulting from a proceeding

challenging the legality of the Proposed Combination might not be

possible, or might be less than an effective remedy; and

Whereas, the Commission is concerned that if the Proposed

Combination is consummated, it will be necessary to preserve the

Commission's ability to require the divestiture of the Properties to be

Divested as described in Paragraph I of the Consent Order and the

Commission's right to seek to restore the NGC and Chevron fractionation

businesses at Mont Belvieu, Texas as independent, viable competitors;

and

Whereas, the purpose of this Hold Separate and the Consent

Agreement is to:

(i) preserve the Property to be Divested as a viable independent

business pending its divestiture as a viable and ongoing enterprise;

(ii) remedy any anticompetitive effects of the Proposed

Combination; and

(iii) preserve the Property to be Divested as an ongoing,

competitive entity engaged in the same business in which it is

presently employed until divestiture is achieved; and

Whereas, NGC's entering into this Hold Separate shall in no way be

construed as an admission by NGC that the Proposed Combination

constitutes a violation of any statute; and

Whereas, NGC understands that no act or transaction contemplated by

this Hold Separate shall be deemed immune or exempt from the provisions

of the antitrust laws or the Federal Trade Commission Act by reason of

anything contained in this Agreement.

Now, therefore, the parties agree, upon the understanding that the

Commission has not yet determined whether the Proposed Combination will

be challenged, and in consideration of the Commission's agreement that,

at the time it accepts the Consent Agreement for public comment it will

grant early termination of the Hart-Scott-Rodino waiting periods for

any transactions that are part of the Proposed Combination and are

subject to any Hart-Scott-Rodino waiting period that has not yet

expired, and unless the Commission determines to reject the Consent

Agreement, it will not seek further relief from NGC with respect to the

Proposed Combination, except that the Commission may exercise any and

all rights to enforce this Hold Separate, the Consent Agreement to

which it is annexed and made a part thereof, and the Order contained

therein, once it becomes final, and in the event that the required

divestiture is not accomplished, to seek divestiture of the Property to

be Divested, and other relief, as follows:

1. NGC agrees to execute and be bound by the Consent Agreement;

2. NGC agrees that from the date of its signing of the Consent

Agreement until the earliest of the dates listed in subparagraphs 2.a-

2.c, it will comply with the provisions of paragraphs 3, 4, 5 and 6 of

this Hold Separate:

a. three business days after the Commission withdraws its

acceptance of the Consent Agreement pursuant to the provisions of

Section 2.34 of the Commission's Rules;

b. 120 days after publication in the Federal Register of the

Consent Agreement, unless by that date the Commission has finally

accepted such Agreement;

c. the day after the divestitures required by the Consent Agreement

have been completed.

3. With respect to the Fractionation Facility located in the city

of Mont Belvieu, Chambers County, Texas, partially owned by NGC and

known as Mont Belvieu I (``MB I''), NGC agrees to cease serving as the

Commercial Operator within thirty days (30) after signing the Consent

Agreement, provided that the other party to the MB I Ownership

Agreement agrees to be installed as the Commercial Operator of MB I by

that date. In the event that the other party to the MB I Ownership

Agreement has not elected to become the Commercial Operator within said

thirty (30) day period, NGC will hold its interests in the assets and

business of MB I separate and apart on the following terms and

conditions;

a. NGC's rights, obligations and duties as the Commercial Operator

of MB I shall be exclusively administered by David Rook. All NGC

employees who are necessary to perform, or in any way assist in the

performance of, any of the activities of the Commercial Operator of MB

I shall report to Mr. Rook, and NGC shall provide the Commission with a

list of all such employees, together with a full description of the

assigned duties of each listed employee and an explanation of how such

duties are necessary for the effective functioning of the Commercial

Operator of MB I, which list shall be updated whenever its membership

or any member's assigned duties change. NGC shall have no authority to

remove Mr. Rook nor any other NGC employee thus assigned to report to

him, except for cause.

b. Except as provided by this Hold Separate, neither Mr. Rook nor

any employee of NGC named in the list required in Paragraph 3.a. above

shall disclose any confidential information concerning MB I to an NGC

employee not named on any such list or use confidential information for

any purpose other than in the performance of that employee's assigned

duties enumerated in the list required in Paragraph 3.a. above. Said

employees shall enter a confidentiality agreement prohibiting

disclosure of confidential information. Neither Mr. Rook nor any NGC

employee assigned to report to him pursuant to this Hold Separate shall

participate in any business decision or attempt to influence any such

decision involving any other Fractionation Facility in which NGC has an

interest. Neither Mr. Rook nor any NGC employees assigned to report to

him pursuant to this Hold Separate shall have access to any

confidential information concerning any other Fractionation Facility in

which NGC has an interest. Meetings of the MB I Management Committee

during the term of this Hold Separate shall be stenographically

transcribed and the transcripts retained for two (2) years after the

termination of this Hold Separate; and

c. NGC shall do nothing to prevent, impede or interfere with the

person or entity that succeeds NGC as either the Commercial Operator or

the Facility Operator of MB I in undertaking reasonable efforts to

offer employment to any NGC employees who assist in the performance of

any activities that NGC engages in as the Commercial Operator at MB I

or as the Facility Operator at MB I, respectively.

4. With respect to the Fractionation Facility located in the city

of Mont Belvieu, Chambers County, Texas, and owned by a partnership

known as Gulf Coast Fractionators (``GCF'') in which NGC is a partner,

NGC agrees to cease serving as the Commercial Operator within thirty

(30) days after signing the Consent Agreement, provided a replacement

agrees to be installed as the Commercial Operator of GCF by that date.

Within one hundred and twenty (120) days after the signing of the

Consent Agreement, NGC shall cease to serve as the Facility Operator of

GCF, provided a replacement agrees to be installed as the Facility

Operator of GCF by that date. In the event that a replacement has not

elected to assume the activities of the Commercial Operator of GCF

within the thirty (30) day period provided or that a replacement has

not elected to assume the activities of the Facility Operator of GCF

within the one hundred and twenty (120) day period provided, NGC will

hold its interests in the assets and

[[Page 48703]]

business of GCF separate and apart on the following terms and

conditions:

a. NGC's rights, obligations and duties as the Commercial Operator

of GCF, in the first instance, and as the Facility Operator, of GCF, in

the second instance, shall be exclusively administered by an NGC

designee. In either instance, all NGC employees who are necessary to

perform, or in any way assist in the performance of, any of the

activities being administered by said designee shall report to said NGC

designee, and NGC shall provide the Commission with a list of all such

employees, together with a full description of the assigned duties of

each listed employee and an explanation of how such duties are

necessary for the effective functioning of, in the first instance, the

Commercial Operator of GCF, and in the second instance, the Facility

Operator of GCF, which list shall be updated whenever its membership or

any member's assigned duties changes. NGC shall have no authority to

remove its designee or any other NGC employee thus assigned to report

to said designee, except for cause.

b. Except as provided by this Hold Separate, neither the NGC

designee to be identified pursuant to Paragraph 4.a. above nor any

employee of NGC named in the list required by Paragraph 4.a. above

shall disclose any confidential information concerning GCF to an NGC

employee not named on any such list or use confidential information for

any purpose other than in the performance of that employee's assigned

duties enumerated in the list required in Paragraph 4.a. above. Said

employees shall enter a confidentiality agreement prohibiting

disclosure of confidential information. Neither the NGC designee nor

any NGC employee assigned to report to this individual pursuant to this

Hold Separate shall participate in any business decision or attempt to

influence any such decision involving any other Fractionation Facility

in which NGC has an interest. Neither the NGC designee nor any NGC

employees assigned to report to him pursuant to this Hold Separate

shall have access to any confidential information concerning any other

Fractionation Facility in which NGC has an interest. Meetings of the

GCF Management Committee during the term of this Hold Separate shall be

stenographically transcribed and the transcripts retained for two (2)

years after the termination of this Hold Separate.

5. With respect to GCF, NGC further agrees:

a. To do nothing to prevent, impede or interfere with the person or

entity that succeeds NGC as either the Commercial Operator or the

Facility Operator of GCF in undertaking reasonable efforts to offer

employment to any NGC employees who assist in the performance of any

activities that NGC engages in as the Commercial Operator at GCF or as

the Facility Operator at GCF, respectively; and

b. In its capacity as a GCF partner, NGC shall sponsor and support