FTC Clears Buckeye Partners $517 Million Purchase of Shell Pipelines and Terminals

Acquisition Excludes Terminal in Niles, Michigan; For 10 Years, Companies Required to Notify Commission of Any Sales, Transfers Regarding Niles Terminal

For Release

Under the terms of a consent agreement with the Federal Trade Commission announced today, Buckeye Partners, L.P. (Buckeye) will be permitted to complete its proposed $517 million acquisition of selected refined petroleum pipelines and terminals from Shell Oil Company (Shell). To protect competition for terminaling in and around Niles, Michigan, the parties will be required for 10 years to notify the FTC before acquiring, selling, or transferring the Niles terminal assets that were part of the parties’ originally proposed transaction.

Through the transaction conditionally approved by the Commission today, Buckeye will acquire from Shell five refined petroleum products pipelines and 24 petroleum products terminals in the United States, including: 1) the 309-mile North Line Products System; 2) the East Line Products System; 3) the Two Rivers Pipeline and two pipelines serving St. Louis, Missouri; and 3) terminals in Illinois, Indiana, Ohio, and Michigan.

“The Commission’s competitive concerns regarding the proposed transaction were focused on the petroleum products terminals in and around Niles, Michigan,” said Susan A. Creighton, Director of the FTC’s Bureau of Competition. “By taking these assets off the table and requiring the companies to provide prior notification before selling or transferring them to anyone else, the Commission’s ability to protect consumers from reduced competition and higher prices will be preserved.”

Parties to the Transaction

Buckeye, a Delaware corporation, is a partnership engaged in the storage, terminaling, and pipeline transportation of refined petroleum products, including gasoline, diesel fuel, and other light petroleum products. With operations primarily in the Northeast and Midwest regions of the United States, the corporation reported annual sales of $273 million in 2003. In addition to the transportation services it provides, Buckeye and its wholly owned subsidiary, Buckeye Terminals, LLC (BT), own and operate 16 petroleum storage facilities and truck loading terminals in Indiana, Illinois, Michigan, New York, Ohio, and Pennsylvania.

Shell is a diversified multinational energy company engaged in the manufacturing, refining, distribution, transportation, terminaling, and marketing of a range of petroleum products, including gasoline, diesel fuel, jet fuel, motor oil, lubricants, petrochemicals, and other products. Shell Oil Company is the U.S. operating arm for the Royal Dutch/Shell Group of companies, which is owned 60 percent by Royal Dutch Petroleum Company of the Netherlands and 40 percent by The Shell Transport and Trading Company, p.l.c. of the United Kingdom. For 2003, Shell reported total revenues of more than $268 billion.

Shell Pipeline Company LP (Shell Pipeline), a wholly owned subsidiary of Shell Oil Products US, has its main offices in Houston, Texas. Shell Pipeline provides transportation for crude oil and refined petroleum products throughout the United States, operating 13,000 miles of pipeline in 22 states, with an interest in an additional 28,000 miles of pipeline in 34 states, as well as 115 terminals.

On June 30, 2004, Buckeye and Shell entered into an agreement through which Buckeye would acquire a package of refined petroleum pipeline and terminal assets from Shell for approximately $530 million. These assets included a Shell refined petroleum terminal in Niles, Michigan. In response to competitive concerns raised by the Commission, the companies subsequently modified their agreement and proposed a transaction that excludes the Niles terminal from the assets to be acquired.

The FTC’s Complaint

According to the Commission’s complaint, the transaction as originally proposed could be anticompetitive and could violate the FTC Act and the Clayton Act, as amended, in that it could substantially lessen competition in the market for the terminaling of gasoline, diesel fuel, and other light petroleum products in the area around Niles, Michigan. The FTC alleges that the market for terminaling services in the Niles area appears to be highly concentrated and that had the original transaction been consummated as proposed, concentration in that market would have increased significantly. In contrast, the modified acquisition conditionally approved by the FTC would not alter concentration levels in the Niles area, as it does not involve the sale of Shell’s Niles terminal to Buckeye. The complaint also alleges that entry into the relevant market for terminaling services in the Niles area is difficult, and would not be timely, likely, or sufficient to remedy the possible anticompetitive effects of the transaction as originally proposed.

The complaint further alleges that the acquisition, if consummated as originally proposed, may have led to a substantial lessening of competition in terminaling services in the Niles Area, and that such competitive harm could result from: 1) the elimination of direct competition between Buckeye and Shell in the supply of terminaling in the Niles area, and 2) an increased likelihood of collusion or coordinated interaction between the remaining competitors in the post-merger environment in the relevant markets.

The Consent Order

To address the possible anticompetitive effects of the transaction as originally proposed, the consent order requires Buckeye to notify the Commission of an acquisition of any interest in the Niles terminal for 10 years. In addition, the order requires Shell to provide prior notification to the FTC of a sale or transfer of any interest in the Niles terminal for 10 years. It also requires both companies to comply with premerger waiting periods similar to those found in the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976. Through the terms of the order, the FTC will be able to assess any proposed transaction involving the Niles terminal and the parties that may raise antitrust concerns, but may not be reportable under the HSR Act, enabling it to guard against such potentially anticompetitive transactions.

The Commission vote to accept the consent agreement and place a copy on the public record was 5-0. The order will be subject to public comment for 30 days, until October 26, 2004, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, consent agreement, and an analysis to aid public comment are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No.: 041-0162)

Contact Information

Media Contact:
Mitchell J. Katz
Office of Public Affairs
202-326-2161
Staff Contact:
Lesli C. Esposito
Bureau of Competition
202-326-3450